Netflix Inc. (NFLX) is in talks to acquire the internet streaming rights of a 26-episode drama, called “House of Cards,” even before the show hits the small screen. The drama series, starring Kevin Spacey, is slated to be the first original TV series by the company. Netflix is expected to spend around $100.0 million.
“House of Cards” derives its title from a novel bearing the same name and is about a British Politician who desires to succeed Margaret Thatcher as the British prime minister. Media Rights Capital is the producer of the show and Mr. Fincher is the director as well as the executive producer. Kevin Spacey not only stars in the series but is also the executive producer.
If Netflix wins the rights to the series “House of Cards”, it will emerge as a serious player in the pay-TV channels market, offering stiff competition to the likes of HBO. According to Deadline.com, HBO and AMC are also bidding for the show.
Netfilx is already tied to TV shows like “Frasier” and “Family Ties.” Last year, Netflix entered into a five-year deal worth $1.0 billion with pay-TV channel Epix for the first rights to their movies and TV episodes. Viacom Inc., Metro-Goldwyn-Mayer Inc. and Lions Gate Entertainment Corp. (LGF) jointly own Epix.
Netflix currently has more than 20,000 titles in its streaming library, but most of them are previously-aired TV series and older movies.
We believe that through the monitoring of potential partnership opportunities with big Hollywood studios and cable companies Netflix would be able to maintain a diversified and upgraded catalog that would improve its image over the long term.
While in the nascent stage, we believe the online movie and television market will remain fragmented over the long term, due to low entry barriers and declining DVD usage. Netflix continues to face tough competition from Amazon.com Inc. (AMZN), Apple Inc. (AAPL) and Google Inc. (GOOG), as well as cable operators.
Netflix also continues to face stiff competition from Movie gallery Inc. and Red Box, the kiosk company owned by Coinstar Inc. (CSTR) that rents DVDs for $1.00 per night.
We maintain a Neutral rating on a long-term basis (6-12 months) due to this increasingly competitive market and lack of visibility regarding Netflix’s international expansion strategy. Currently, Netflix has a Zacks #2 Rank, which implies a Buy rating on a short-term basis.
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