Netflix Inc (NFLX) has entered into a multi-year deal with Lions Gate Entertainment Corp. (LGF) for streaming “Mad Men”. The deal value is estimated between $75 million and $100 million, according to the Wall Street Journal.
“Mad Men” is a drama series set in the 1960s. From July 27, 2011, Netflix subscribers will be able to stream the first four seasons, while subsequent seasons will be added annually after it goes on air on the AMC Network. The fifth season is expected to be aired from early 2012, though no specific date was mentioned.
The Canadian subscribers of Netflix are already able to stream “Mad Men”.
Netflix recently renewed its agreement with Twentieth Century Fox, which will enable it to stream the first season of “Glee,” an Emmy award winning series, and another cult series called “Sons of Anarchy”.
Netflix is focused on content improvement through partnerships with big Hollywood production houses such as Paramount Pictures and Twentieth Century Fox. With the Lions Gate agreement, it has done away with its reliance on cable TV providers for streaming of shows. Lately, Cable TV operators have been treating Netflix as a competitor rather than a customer, instituting streaming delays on some of their shows.
We believe that Netflix’s migration from the mail-order DVD rental business to a content-rich online movie streaming company would prove to be a strategic positive, since online streaming does not require handling and mailing charges and therefore, no related costs.
The success of the strategy is also borne out by Netflix’s 20.2 million-strong subscriber base. A focus on content additions would provide competitive edge to Netflix. We believe the partnerships entered into at this time will enhance Netflix’s competitive edge and strengthen its position in the emerging market of online video streaming.
We have a Neutral recommendation on Netflix shares in the long run due to recent news flow regarding streaming delays and a cap on its bandwidth in Canada.
Currently, Netflix has a Zacks #2 Rank, which implies a Buy rating on a short-term basis.
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