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Netflix thinks HBO will soon start acting like Netflix

Myles Udland
Markets Reporter

Netflix (NFLX) earnings are out, and it’s a beat.

In after hours trade on Wednesday, shares of the streaming-video service were up as much as 8% after better-than-expected international subscriber additions.

In its shareholder letter accompanying the release, Netflix also dished out its vision for the online-streaming business, and made a bold call on one of its biggest competitors.

“The BBC has become the first major linear network to announce plans to go binge-first with new seasons, favoring internet over linear viewers,” the company wrote in its letter.

“We presume HBO is not far behind the BBC.” (Emphasis added.)

HBO is the gold standard in premium content, and is the original subscription-based, over-the-top video offering. And while HBO now has a full suite of web- and mobile-based ways to view its content, the network still releases episodes of its shows as they go.

And for anyone who reads the internet the day after a “Game of Thrones” episode airs can tell you, it’s obvious why. HBO still sees value in the buzz created around a show that airs just one episode a week.

Netflix, on the other hand, has invented an entirely new way to consume video content: binge-watching. The habit really caught fire with the release of Netflix’s first season of its original series “House of Cards,” and is now almost the default way that many people consume video.

And the company obviously believes this is the industry’s future.

Here’s Netflix’s full outline for the industry and its competitors from its letter:

Internet video is a global phenomenon. Amazon Prime Video expanded recently to match our territory footprint, while YouTube remains far larger than either of us in terms of global video enjoyment minutes. Video consumption is growing on Facebook, and Apple is rumored to be adding video to its music service. Satellite TV operators are moving to become internet MVPDs, such as ViaSat to ViaPlay in the Nordics, DISH to Sling, and DirecTV to DirecTV Now. Insurgent firms such as Molotov.tv in France and Hulu are building native-internet interfaces for TV network bundles. CBS is releasing a major original series (Star Trek) exclusively on its domestic SVOD service (with us as international partner). Finally, the BBC has become the first major linear network to announce plans to go binge-first with new seasons, favoring internet over linear viewers. We presume HBO is not far behind the BBC. In short, it’s becoming an internet TV world, which presents both challenges and opportunities for Netflix as we strive to earn screen time.

As for its actual results, Netflix reported earnings per share of $0.15 on revenue of $2.48 billion. Both numbers were just slightly better than Wall Street forecasts.

The company added 7.05 million subscribers during the quarter, including 5.12 million from outside the US. According to estimates from Bloomberg, Wall Street analysts were looking for international subscriber additions of 3.8 million.

During the fourth quarter, the company’s cash burn totaled $639 million, up from $276 million during the same quarter last year. On Tuesday, the company announced a deal to acquire Jerry Seinfeld’s streaming series “Comedians in Cars Getting Coffee” for a reported $100 million.

The options market had been anticipating a roughly 9% move in the stock following these results.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland