Netflix Streams The Hunger Games

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Reportedly, Netflix (NFLX) has obtained the exclusive streaming rights of the 2012 blockbuster movie, The Hunger Games. The movie became available for online streaming to Netflix subscribers in the U.K. and Ireland from Mar 3, 2013. Netflix’s U.S. subscribers will have access to the streaming rights later this year. Notably, The Hunger Games is already available for streaming to Netflix subscribers in Canada.

Netflix had debuted in the U.K. and Ireland in early 2012 and since then entered into a number of licensing agreements with big Hollywood production houses such as Lions Gate Entertainment Corp. (LGF), Metro-Goldwyn-Mayer Studios Inc. and Miramax studios for exclusive streaming rights to their movies and other programs. Apart from recent movies and documentaries, Netflix is also boosting its original content portfolio to entice new subscribers in the U.S. and international markets.

The company’s continuous endeavor to provide diversified and exclusive content is noteworthy as there is no dearth of content providers in the region. Apart from Amazon’s (AMZN) LoveFilm, the aforesaid market has other online players such as Channel 4, the BBC, British Sky Broadcasting Group Plc and ITV Plc.

We believe that the exclusive content provided by the company is its USP in gaining new subscribers and retaining old ones. This applies to both the company’s international and domestic markets, as subscription fees are the sole source of revenue for the company.

However, higher costs owing to international ventures and licensing fees, and continued subscriber losses in its DVD business are near-term headwinds. Mounting losses from the international business, due to higher content and marketing costs, is another concern in the short term. In the domestic market, the company competes with bellwethers such as Time Warner’s (TWX) HBO and Verizon.

Nonetheless, we believe that Netflix’s top line will expand, as subscribers take note of its improving portfolio. This would ultimately enable the company to add to its market share in the video-on-demand market. We believe that the ability to balance rising costs against subscriber growth and retention will dictate the company’s future prospects.

Currently, Netflix has a Zacks Rank #2 (Buy).

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