Netflix Inc. (
recently announced that all three seasons of popular crime
suspense series "The Killing" will be available to its
subscribers in 2013. Currently, the first two seasons are
available to Netflix's US customers. Netflix expects that
customers in all 40 countries it covers will be able to see them
within the next few months.
Most importantly, the prior two seasons will be available
online before the launch of season 3 on AMC. Netflix's
partnership with the series producer Fox Television Studios will
enable it to offer the latest season just three months after its
US television release.
We believe that the addition of this popular television show
will strengthen Netflix's position in the video-on-demand ("VOD")
market. The recent partnerships with Fox, Turner Broadcasting
System and The Warner Bros. Television Group, both divisions of
Time Warner (
Walt Disney (
will allow Netflix to offer fresh content to its subscribers in
We believe that these deals would be incrementally beneficial
for Netflix in attracting new subscribers as well as retaining
the old ones. Netflix's new and exclusive content offerings to
its subscribers are the company's biggest USP compared to some of
its closest peers. Apart from recent movies and documentaries,
Netflix is also boosting its original content portfolio to entice
new subscribers in the U.S. and International markets.
In the recently concluded fourth quarter of 2012, Netflix's
paid streaming subscriber base (both domestic and international)
increased 8.76 million from the year-ago quarter and 2.87 million
in the previous quarter to 30.36 million.
We believe that the improved content makes Netflix's streaming
services distinguishable from other service providers such as
Amazon.com Inc. (
, Hulu as well as the newly-launched services from cable and
media companies such as Comcast, Dish Network and Verizon.
However, higher costs owing to international ventures and
licensing fees, and continued subscriber losses in its DVD
business are near-term headwinds. Mounting losses from the
international business, due to higher content and marketing
costs, is another concern in the short term.
Nonetheless, we believe that improving paid subscriber base,
international expansions, diversified content portfolio and a
huge video library are the positives in the near term. Moreover,
Netflix's own content delivery network, Open Connect, connects
its video library directly to Internet service providers,
ensuring fast data transfer to enhance customer experience. This
will further improve customer engagement going forward.
Currently, Netflix has a Zacks Rank #2 (Buy).
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