Growth Expected in Netflix Video Streaming Service

by Trefis Team
-13.10%
Downside
157
Market
137
Trefis
NFLX
Netflix
Rate   |   votes   |   Share

Ever since Netflix (NASDAQ:NFLX) started its streaming service in 2007, the availability of content and the number of videos streamed has been on an upward trend. From a paltry 0.6 videos per month in 2007, it is estimated that the number of videos streamed per subscriber has almost doubled to 1.2 views per month as of 2009 [1]. We expect further growth in Netflix’s number of videos streamed.

Netflix competes with cable and satellite providers like Time Warner Cable (NYSE:TWC), Comcast (NASDAQ:CMCSA), Dish Network (NASDAQ:DISH) and DirecTV (NASDAQ:DTV), and video rental services like Redbox. We currently have a Trefis price estimate of $85 for Netflix’s stock, about 40% below the current market price of $141.

Number of Videos Streamed per Subscriber

Netflix either streams videos directly through its website or through partners like Roku. Netflix is continuing to make more content available online. For now, subscribers have to get DVDs mailed to them if they want to view content that is not available for online viewing. Netflix is planning to expand its service internationally, starting with Canada.

The company announced today (Wednesday) the launch of its Canadian streaming-only service for $7.99 per month.  We expect that future international services are likely to be streaming-only which will aide growth in the number of videos streamed per subscriber.

However, licensing content for distribution through streaming works out to be more expensive for Netflix than through DVD distribution.  In addition, licensing fresh movies for online viewing immediately after its theater release might cannibalize theater earnings for studios.

The average of Trefis member forecasts for Number of Videos Streamed per Subscriber indicate an increase from 1.9 per month in 2010 to 4.4 per month by 2016, compared to the baseline Trefis estimate of an increase from 1.6 per month in 2010 to 3.2 per month by the end of the Trefis forecast period. The member estimates imply a downside of 1% to the Trefis price estimate for Netflix’s stock.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Netflix’s stock to Number of Videos Streamed per Subscriber.

Our complete analysis for Netflix’s stock is here.

Update (9/22/10):  This article was updated to reflect the launch of Netflix’s Canadian streaming service

Notes:
1. Netflix comes out with press releases periodically detailing the number of minutes its streaming service has been used for. Independent websites like Streaming Media estimate this figure on a periodic basis.

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!