) subscribers in the U.S., U.K. and Canada will be able to stream
, a comedy documentary, from September 21, 2012. Netflix was given
the exclusive streaming rights by Electus International, a business
). In addition to the exclusive streaming rights in the
aforementioned countries, Netflix was awarded a global
non-exclusive subscription video on demand ("SVOD") right for the
is being co-produced by Morgan Spurlock and Electus founder, Ben
Silverman. The story of
revolves around actors Will Arnett and Jason Bateman as they
explore the many facets of male grooming habits. The film has
interviews of some famous persons such as John Waters, ZZ Top band
members Dusty Hill and Billy Gibbons, Anthrax musician Scott Ian
and author Brett McKay to name a few.
Netflix has been expanding its video on demand ("VOD") offerings
with exclusive deals from various production and distribution
houses. Very recently, Netflix added exclusive rights to stream
season 1 of ABC's popular shows
Once Upon a Time
. The exclusive availability of the season 1 episodes is expected
to create significant buzz around the upcoming season 2 episodes.
The addition of these ABC hits is expected to expand Netflix's
customer base going forward.
We believe that the improved content makes its streaming
services distinguishable from other service providers such as HBO
), which has entered into a three-year agreement with Epix,
expanding the archive of films available on its streaming video
site, Amazon Prime Instant Video. Other competitors include Hulu
and other cable and media companies such as
Dish Network Corp.
Verizon Communications Inc.
Moreover, when compared with some of its cable and
communications peers that have diversified revenue and cash flow
streams, Netflix relies solely on streaming for future growth, as
its DVD rental business continues to lose subscribers.
We believe that Netflix's improving content portfolio and
international expansion are noteworthy. Despite higher license
renewal costs, subscriber additions are driving Netflix's sales.
This would ultimately enable the company to strengthen its position
over the long term. In the recently concluded second quarter of
2012, the total number of subscribers (Domestic and International)
jumped 18% year over year to 30.1 million.
However, higher capital expenditures due to international
expansion will hurt earnings growth in the near term, in our view.
Moreover, we believe that the streaming market is becoming
overcrowded and this will hurt Netflix's margins going forward.
We have a Neutral recommendation on Netflix over the long term.
Currently, Netflix has a Zacks #3 Rank, which implies a Hold rating
over the short term.
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