Netflix (NFLX) Success Begins to Feed on Itself

January 8, 2013 8:47 AM EST
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Price: $132.89 -0.61%

Rating Summary:
    33 Buy, 22 Hold, 10 Sell

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Today's Overall Ratings:
    Up: 35 | Down: 31 | New: 11
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Yesterday Netflix (NASDAQ: NFLX) announced a multi-year deal with important strategic partner, Warner Bros. The deal makes Netflix the exclusive online distributor of complete prior-season content for five TV shows, including Revolution (NBC), The Following (Fox), Longmire (A&E), Political Animals (USA), and 666 Park Avenue (ABC). Netlix will also get access to three catalog titles.

While no terms were disclosed, Cantor Fitzgerald analyst Youssef Squali estimates the deal will cost Netlix $100 million per year. This is considerable less than a $300 million movie deal reached with Disney (NYSE: DIS).

"While we estimate that the recent pay TV agreement with Disney will cost ~$300M/yr for exclusive rights to all theatrical production, this much-narrower deal covers only eight TV shows. As such, the annual cost for this deal is likely to be less than $100M/yr, in our view," said Squali.

Wall Street views the deal as another step in securing content while limiting distribution to broadcasters and online competitors.

"This agreement marks another important step for Netflix as it shifts from distributor to more of programmer. We believe Netflix will continue to increase the quality of programming, attracting more subscribers, and in turn freeing up more cash for content, enhancing the virtuous cycle" concluded Squali.

Cantor Fitzgerald has Buy rating on Netflix (NASDAQ: NFLX) with a price target of $110.00.

For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.

Shares of Netflix closed at $99.20 yesterday.

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