Netflix Narrows Subscriber Gap With HBO

Yet more reason for competitive tension between Netflix (NSDQ: NFLX) and HBO comes from the fourth-quarter pay-TV subscriber numbers out Friday from SNL Kagan, which shows a fourth consecutive quarter of decline for HBO.

The pay-TV giant is still far ahead of the pay-TV pack, with 28.2 million. And if it’s any consolation, the 3Q-4Q drop of 75,000 subs was the smallest yet in a tough 2010 for HBO, which lost a total of 1.6 million subscribers over the course of the year.

The timing couldn’t be worse given the huge leap Netflix made in its own fourth-quarter tally. It grabbed an additional 7.7 million subs to shoot past the 20 million mark. That’s more than even Showtime and Starz, which in 4Q finished with healthy gains that took them to 19.5 million and 18.1 million, respectively.

There’ a number of extenuating factors that explain HBO’s downturn, but even though it’s not particularly precipitous, there’s a perception issue here given Wall Street has little patience to absorb the complexities of affiliate relations. What investors do know is how important the pay-TV giant is to Time (NYSE: TWX) Warner’s bottom line.

2011 could be the road to recovery for HBO, which still has some pretty big guns to roll out on the programming front, between medieval series Game of Thrones and the Kate Winslet miniseries Mildred Pierce.