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Astral taking HBO 'over the top' to fend off Netflix threat

Netflix Inc.'s CEO is afraid of vampires. He's afraid of 1920s gangsters. He's worried about murderous creatures living in a mythological forest.

Specifically, Reed Hastings is spooked by popular HBO content – from True Blood and Boardwalk Empire to the fantasy world of Game of Thrones – that is not available on Netflix, which delivers TV shows and movies over the Internet. HBO keeps its content locked up on its own channel, making it available on its own Netflix-like Internet service, HBO Go.

Mr. Hastings recently said that of all his competition, HBO Go scares him the most. Now he will also have to face those fears in Canada, where Netflix has more than one million subscribers.

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Astral Media Inc. , which has the exclusive right to distribute HBO programming in Eastern Canada on The Movie Network, is developing its own HBO Go service for subscribers. The new service will be launched next July or August.

"HBO obviously is a pre-eminent player in pay television," Astral chief executive officer Ian Greenberg said in an interview at the company's annual general meeting in Toronto on Tuesday. "Their quality of programming on a pay-TV platform is by far the best in the world."

For Astral, the HBO Go product is another attempt to fend off "over-the-top" services such as Netflix, and to keep subscribers from switching off their cable or satellite subscriptions.

The Movie Network has had a partnership with HBO for two decades, and has had the right to market its shows under the HBO Canada name since September, 2008. (That agreement also maintained Astral's exclusive rights to HBO shows on digital platforms. Corus Entertainment Inc. has the same rights to HBO programming on its Movie Central channel in Western Canada.)

That marketing effort has helped the growth of The Movie Network, Mr. Greenberg said. In 2010, the channel brought in profits before interest and taxes of $31.6-million, according to regulatory documents, up from $22.3-million two years earlier.

Although the HBO Go offering is still being developed, Astral already makes HBO programming available to subscribers online and on mobile devices, through services such as Rogers On Demand Online and Vidéotron Ltée's Illico Web service.

The HBO Go product will give Astral a way to centralize some of its most valuable programming under a single HBO banner, allowing subscribers to log in no matter who their TV provider is.

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"Netflix leads a big growing market and big growing markets always attract competition," Netflix spokesman Steve Swasey said in an e-mail Tuesday. "When consumers compare, they will see the most convenience, best selection and greatest value are with Netflix."

Astral's move to increase its presence online and on smartphones and tablets comes as the television industry fights against the threat of less expensive, Internet-delivered services.

Tuesday's announcement caps a year in which Astral was one of the most outspoken of Canadian broadcast companies in pushing the Canadian Radio-television and Telecommunications Commission to address the threat of Netflix.

"The regulated environment in which we operate has not yet sufficiently evolved to address changes in the competitive landscape," Mr. Greenberg said in a speech at the Empire Club of Canada in October.

Mr. Greenberg pushed this point again on Tuesday, saying that a foreign-owned company such as Netflix should not be allowed to compete against Canadian players unless it is subject to the same rules. Many Canadian companies, for example, are upset that Netflix does not have to pay into funds to produce Canadian TV shows and movies, as they are required to do.

"Let's have a level playing field for everyone operating in the broadcast industry in Canada," he said in the interview. "Somehow it's up to the government or the CRTC – to create a level playing field so we are not at a disadvantage against foreign operations."

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