Netflix’s (NASDAQ:NFLX) stock hasn’t recovered from the moderate dip it experienced after Comcast (NASDAQ:CMCSA) announced the launch of its streaming service, Xfinity Streampix (see Xfinity Streampix Arrives: What’s the Value for Comcast?). The developments in the past week were not significant enough to move Netflix’s stock price but are worth noting. Netflix has shifted its focus from only movies to include more of television content. About half of Netflix’s total viewing now comes from TV shows.  TV shows attract loyal viewers that tend to watch several episodes in one sitting. This is the kind of hook that Netflix and other streaming companies such as Amazon (NASDAQ:AMZN) are looking for. That being said, Netflix is not just a movie rental company but rather a video rental company and it will look to monetize and leverage all forms of videos.
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Netflix’s deal with Starz has ended and its content has been taken off Netflix’s catalog beginning March 2012. Although the Starz deal played a vital role in Netflix’s initial expansion of its streaming service, it no longer accounted for a significant part of its viewing. Netflix has signed several new content deals over the past couple of years, and the loss of Starz is not a reason for worry anymore.
Netflix has also stated that it plans to launch its app on more smart TV platforms in the U.K. and have a custom ‘Netflix’ button on remote controls.
We note that there were certain hints of developing competition in the past week, but nothing of that is alarming for now. In Latin America, America Movil SAB is looking to expand its online movie & TV service to Mexico.  It currently offers these services in Argentina and Uruguay. This is not concerning currently as the company still needs to sort out some legal issues but, over time, billionaire Carlos Slim can infuse enough capital into this service to give serious competition to Netflix.
In the U.K., retailer Dixons is launching an online movie rental and sale service, but we don’t feel it will be much of a threat to Netflix as the service will not be subscription-based.
It appears that Netflix’s entry into the foreign markets is serving as a wake-up call for the local players. Does this mean that media companies in other countries will take a lesson and launch streaming services well in advance of Netflix’s potential arrival?
If this happens, it could slow down Netflix’s future international growth.
Our price estimate for Netflix stands at $133, implying close to 15% premium to the market price.Notes:
- Once Film-Focused, Netflix Transitions to TV Shows, The New York Times, Feb 27 2012 [↩]
- Slim Readies Netflix-Like Service for Mexico, Bloomberg Businessweek, March 2 2012 [↩]