) and Sweden's pay television service, Com Hem recently entered
into a partnership, which will enable Com Hem subscribers to
access the former's video streaming services through
) set-top boxes beginning December.
This is Netflix's second partnership with a European cable
service provider within a short span. Earlier this month, Netflix
signed a deal with Virgin Media to offer its streaming services
to U.K. subscribers through TiVo set-top boxes.
Com Hem's strong video subscriber base (more than 605K) is
expected to boost Netflix's customer base. We believe that
Netflix will continue to pursue such partnerships with cable
providers in other European countries to expand its reach and
Apart from Sweden and the United Kingdom, Netflix is
aggressively expanding into other international markets such as
Brazil, Denmark, Mexico and Canada. Recently, the company entered
Netherlands, which is further expected to boost its business
opportunities going forward.
Meanwhile, Netflix is also hoping for similar deals with some
U.S. cable providers as the company targets more subscribers.
Netflix wants to make it easy for the end consumer and is
expected to be available via the existing devices at subscriber
These deals will help Netflix to boost its competitive
position against the likes of
), HBO and other cable operators such as
), who are venturing into the streaming business.
Although international expansions are the key to Netflix's
growth story, increasing investments are expected to hurt
profitability in the near term. At the same time, it is
noteworthy that in the recently concluded second quarter of 2013,
revenues from international operations soared 155.3% from the
We believe that Netflix will continue to pursue expansion
opportunities in other regions of Europe. However, starting
operations in a new country demands huge investments and
considerably increases marketing and general and administrative
expenses. These are expected to keep margins under pressure
during the investment phase.
Netflix has a Zacks Rank #3 (Hold).
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