Netflix changes the game again
Netflix has a history of surprising the industry. After progressing from red envelopes in the mailbox to streaming movies, Netflix may become a premiere network like HBO and Showtime.
Netflix offers DVDs by mail, streaming TV shows and movies, and soon will be offering its first exclusive original series. The company, once thought of as a web-based video store, may soon become a premiere network along with HBO and Showtime.
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Netflix first threatened video stores like Blockbuster by allowing customers to return movie rentals whenever they wanted. Then it began competing with cable companies when it started offering streaming TV shows and movies online, causing more than a few cable customers to drop their expensive plans in favor of Netflix.
With the announcement of the purchase of its own original show, "House of Cards," the company originally known for its red envelopes is now breaking into the business of original programming and may be on track to become a major premiere network like HBO and Showtime. The Netflix exclusive original series is being put together by Kevin Spacey and David Fincher, but was not even written when Netflix outbid HBO and AMC.
The Los Gatos Calif. company boasts about 20 million subscribers - more than most premium channels and almost as much as HBO. But just because exclusive original series help increase subscriptions to premium cable channels, does it mean they will help Netflix?
Netflix CEO Reed Hastings is betting it will. Netflix signed on for two seasons of "House of Cards" - a big gamble worth as much as $100 million.
On the back of the "House of Cards" announcement last week, Credit Suisse upgraded Netflix from "Neutral" to "Outperform" and raised its target share price from $180 to $280. The decision followed a recent decline of Netflix's share evaluation in light of competition entering the streaming movie marketplace from Amazon.com Inc. and Warner Bros. After further analysis, Amazon and Warner Bros. were thought to be less of a threat to Netflix because they are renting on an a la carte basis rather than a subscription basis.
It's been a great week for Netflix, but it's not all good news. Anticipating any possible future market share Netflix may end up grabbing from premiere networks in coming months and years, Showtime withdrew streaming rights to its first-run programs. Showtime's contract changes will take effect this summer and will put an end to streaming of "Dexter" and "Californication" on Netflix.