Netflix Inc. (NFLX) announced that it has renewed its multi-year non-exclusive digital distribution agreement with Twentieth Century Fox effective April 1, 2011. The deal enables Netflix to access Fox’s content.
As per the renewed agreement, Netflix subscribers will be able to watch a wide range of shows from April 1, which includes the first season of “Glee,” an Emmy award winning series, and another cult series called “Sons of Anarchy”. For the latter, the first two seasons are available for streaming and the consequent seasons will be added annually.
Netflix will now gain access to some of the favorite TV series that Fox has in its library including “Ally McBeal” and “The Wonder Years,” which it plans to stream instantly.
Netflix will also be benefited by the movie library of Fox as it boasts an extensive collection.
Netflix has already streamed shows from Fox’s library such as “Lie to Me,” “24,” “Prison Break,” “Arrested Development,” “Buffy The Vampire Slayer,” “X-Files” and many more under the previous agreement.
We believe the renewal of the agreement with Fox, which includes several amendments and title additions, will help improve subscriber retention and additions at Netflix. The new deal would help Netflix to remain a few notches ahead of its peers.
Netflix is focused on content improvement through partnerships with big Hollywood production houses and strategic agreements with cable companies. This has helped it maintain a diversified and upgraded catalog, improving its image and driving subscriber growth.
Netflix recently teamed up with Paramount Pictures, a division of Viacom (VIA), for a multi-year licensing agreement in Canada. As per the 5-year agreement, Netflix will be able to stream classical hits as well as new movies that Paramount Pictures produces and gain access to Paramount’s library of 350 films.
And with larger players beginning to show interest in this emerging market of online video streaming, we believe the strategic partnerships made by Netfix will benefit the company.
However, we have a Neutral recommendation on Netflix for the long run due to recent news flow regarding streaming delays and a cap on its bandwidth in Canada. We fear that other internet service providers could impose similar caps.
Currently, Netflix has a Zacks #2 Rank, which implies a Buy rating on a short-term basis.
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