How Apple Gave HBO Leverage To Use Against Cable

Time Warner Inc's TWX HBO will compete head-on with Netflix, Inc. NFLX when it launches a standalone service that doesn't require cable. Is this the result of Netflix's growth or due to a lack of support from the cable industry?

For answers, Albert Fried & Company Director of Research Rich Tullo looked at HBO's partnership with Apple Inc. AAPL.

"It's important to look at that, 'cause ultimately what HBO is saying is, we have all these relationships with every MVPD [multichannel video programming distributor], and you're not doing a lot to promote our platform," Tullo told Benzinga. "As a matter of fact, you, Comcast, are perhaps doing more to promote Netflix than HBO. We don't like that. If we don't like that, we're going to take our show and put it on Apple and we have better economics than dealing with you if you're not going to promote our programming."

Related Link: Most Netflix Subscribers Still Pay For Cable, Satellite Service

Surprise Benefit: Exclusivity?

Tullo speculated if HBO Now, the company's online-only video service, will open the door to a level of exclusivity.

"If you want HBO in New York and Comcast is willing to pay for that and they want the exclusive in the market, perhaps they can [block out] Apple," said Tullo.

This would not be the first time that HBO's online content was mysteriously absent for some users. Comcast Corporation CMCSA subscribers waited a long time for access to HBO Go (the cable network's online companion) on Roku. This was especially frustrating because other devices -- such as Xbox 360 and Apple TV -- did not prevent Comcast subscribers from using the service.

Whether Comcast could actually stop some users from getting HBO Now remains to be seen. Whatever happens, Tullo believes this is a "very important leverage point that they just created for themselves."

"The second big company in Silicon Valley is also doing business with Time Warner," Tullo added, referring to HBO's deal to provide content to Amazon.com, Inc. AMZN. "So you're going to have Apple and Amazon doing business with HBO and you have Netflix by themselves."

Amazon is expected to pay $300 million for old HBO content over a three-year period that started in 2014.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.