While the announcement of Netflix, Inc. 's NFLX hit series House of Cards season 3 was applauded by its viewers, investors appeared less impressed, keeping share prices range-bound bearish over the past week. Following the announcement, shares fell 1.28% ($8.12) and closed at $474.91 on Friday. Notably, the stock gained nearly 39% year-to-date and the majority of this growth was recorded in the last quarter.
Reportedly, the third season of House of Cards is expected to add 100,000-150,000 new subscribers. House of Cards , an American political drama which premiered in Feb 2013, has helped to establish Netflix as a content producer, competing with industry majors like CBS Corp. CBS . Initially, several networks such as HBO and Starz were approached for airing the show. However, Netflix outbid all, marking its entry in the production business.
We believe that this show is a milestone not only for Netflix but also inspires the new entrants in the online video streaming business such as Amazon.com Inc. AMZN and Google Inc. GOOGL to invest in original content in order to compete with other broadcast and cable channels.
House of Cards also marks Netflix's new concept of publishing all episodes at once which lend continuity to the show and attract even those viewers that don't want to wait for installments.
Consequently, House of Cards clearly is the big bet for Netflix going forward. According to a Cowen & Co. survey, 86% of Netflix viewers were less likely to switch their streaming services following the launch of the first season of the political drama. However, Netflix has not disclosed any data on the show's viewership.
Apart from the new season of House of Cards, Netflix has scheduled over 20 new original series to be aired this year. Given the amount of demand the company is receiving for its original content has led to revise subscription fee. For existing users in the middle tier, prices may go up by $1.00 in 2016 for a two-year contract.
In addition, the company may introduce an $11.99 package for ultra high definition TVs. However, the company expects its total package of 320 hours of original content would cost less in 2015, attracting more subscribers for the company.
Netflix, currently, has a Zacks Rank #3 (Hold).