Netflix Inc. (NFLX) recently announced that it has entered into a multi-year licensing deal with The Weinstein Company (“TWC”). Under the terms of the agreement, Netflix will exclusively stream TWC produced movies on a first run basis from early 2016. However, the financial terms of the transaction were not disclosed.
The recent deal extends the earlier partnership between the two companies, which they signed in Feb 2012. Per that deal, Netflix was able to stream critically acclaimed movies such as The Artist along with other popular productions including the documentary Undefeated and the French movie The Intouchables.
In Aug 2012, Netflix signed another multi-year licensing deal with RADiUS,a multi-platform distribution label from TWC. The deal allowed Netflix to stream new movies such as Bachelorette, Only God Forgives, The Details, and Lay the Favorite to name a few.
The extended partnership will significantly boost Netflix’s content portfolio going forward. TWC is known for producing award-winning movies made for a niche audience. The current partnership deal will help Netflix to target this niche customer base going forward.
Moreover, the recent move reflects Netflix’s continuing focus on developing its subscriber base through content acquisition. Netflix’ partnerships with the likes of CBS Corp (CBS), PBS Distribution and DreamWorks Animation (DWA) have helped the company to offer a variety of shows and movies.
The partnerships have helped Netflix to venture into different genres like comedy, political thrillers, autobiographies and horror. Recently, Netflix entered into a partnership with Fox Television Studios to finance The Killing, a television crime drama, after its production was cancelled by AMC in 2012.
Beside first run movies, Netflix is considering streaming drama series Marco Polo, which will join original shows such as House of Cards, Orange is the New Black, Hemlock Grove and Arrested Development. Netflix plans to double the number of original programs in 2014.
Netflix’s diversified offerings help it to stand out among other content streaming providers such as Amazon (AMZN), HBO and Hulu. Netflix’s consumer-friendly strategy helped to increase its paid streaming subscriber base (both domestic and international) by 38.6% on a year-over-year basis to 35.6 million in the recently concluded second quarter.
However, soaring costs of content acquisition remain a major headwind for Netflix in the near term. As the DVD business continues to lose subscribers, Netflix remains increasingly dependent on the streaming service for further growth. Additionally, rising competition will negatively impact streaming revenues going forward.
Currently, Netflix has a Zacks Rank #3 (Hold).
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