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Netflix Goes Social in US - Analyst Blog

By: Zacks.com
Posted: 3/18/2013 12:48:00 PM
Referenced Stocks: AMZN;CMCSK;FB;NFLX

Netflix ( NFLX ) has decided to extend its social features to its US subscribers. The streaming services provider announced new features that will enable US subscribers to link their Netflix accounts to Facebook ( FB ) .

The integration not only allows Netflix subscribers to see their friends' choices but also share their choice of favorite movies and videos on Facebook. In order to do so, subscribers are required to add "Friends' Favorites" and "Watched by your friends" rows to their Netflix interface.

Netflix has been providing the Facebook integrated service to its international customers in Canada and Latin America over the last one year. However, the Video Privacy Protection Act of 1988 prevented Netflix from offering the service to US customers.

The Act passed in 1988 protects consumer privacy against a specific form of data collection. The Act prevented disclosure of personally identifiable rental records of "pre-recorded video cassette tapes or similar audio visual material". However, in late 2012, the United States Congress passed a bill, which removed the restrictions under the Act.

The integration is expected to be beneficial for both Netflix and Facebook going forward. The integrated service is expected to boost customer engagement, thereby boosting Netflix's subscriber base going forward. Meanwhile, Facebook can use viewer's choice data to target relevant ads.

However, we believe that Netflix will not be the sole gainer from the newly-amended Act. Netflix competitors such as Hulu will also benefit from the new rules as it already began offering Facebook integration to its user's way back in 2011.

In such a scenario, we believe that Netflix's superior content will be the ultimate deciding factor in the ongoing battle for online supremacy. Netflix's new and exclusive content offerings to its subscribers are the company's biggest USP compared to its closest peers, Hulu, HBO, Amazon ( AMZN ) as well as the newly-launched services from cable and media companies such as Comcast ( CMCSK ) .

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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