It seems that media companies are opening up to Netflix (NASDAQ:NFLX) which was once seen as a threat.^[1] How have things changed for Netflix? Below we take a quick look. Although Netflix’s business model is unique, it still competes with Apple’s (NASDAQ:AAPL) iTunes, Hulu, video on demand (VoD) services from pay-TV providers like Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC) and Google (NASDAQ:GOOG) which has announced plans to launch a paid streaming service via Youtube.

Our price estimate for Netflix stands at $153, which is around 35% below market price.

Media Companies Were Hesitant Before

Despite Netflix projecting itself as a complementary service to pay-TV subscription, media companies have been hesitant in the past. It seems that with the business model being new and potentially disruptive to the way videos have been watched traditionally, the initial acceptance was slow. Along with this, Netflix was not handing over large sums for content either.

But Positive Feedback Loop Working – Media Companies Now Like Netflix

However, the fast growth in subscribers over the past few quarters has strengthened Netflix’s position in the market significantly. While it shows how consumer behavior is changing, the increased revenues allow for more cash to buy content. And more content means more subscribers finding the service attractive. Netflix is benefiting from a positive feedback loop and now has the ability to pay big amounts for content.

If Netflix gets full support of the content owners, it might not be outrageous to think that Netflix might penetrate a majority of U.S. households one day – this scenario would make our current projections appear quite conservative. In such a situation, Netflix’s subscriber count might even breach 100 million by the end of our forecast period, resulting in price estimate close to current market price. Maybe that’s what the market is thinking.

See our complete analysis for Netflix’s stock here

Notes: