Netflix Inc.

Netflix, Inc. (NASDAQ:NFLX) A Threat To Movie Theaters

The rise of Netflix, Inc. (NASDAQ:NFLX) has caused speculation that the streaming giant will cause the death of movie theaters. In the most recent quarter for instance, AMC Entertainment Holdings Inc (NYSE:AMC) missed earnings estimates by a big margin while Netflix beat estimates.

However, movie theaters are unlikely to disappear entirely as a result of Netflix. One reason for this is because of the studio payment system which big Hollywood stars are used to. In this system big stars take a low salary in exchange for a cut of the profits that the movie will generate. While Netflix is already achieving success in the making of films, the streaming provider isn’t making huge revenues from each film while big Hollywood studios are still successful in this aspect.

Cord cutting

The rise of Netflix and other video streaming services has, however, lead to the ‘cord-cutting’ phenomenon which has seen cable television operators suffer as they lose subscribers. Instead of fighting some companies have chosen to partner with Netflix. This includes Charter Communications which will make the video streaming giant available on set top boxes in a strategy that was first tried in Europe by the likes of Altice NV in France.

RCN Telecom Services is also another distributor which has embraced set-top integration. Customers of RCN who possess TiVo boxes are also allowed to access Netflix at the touch of a button. Britain’s Virgin Media is also involved in similar partnerships.

“We’re now looking at proposals for including Netflix in some services and beginning to learn the bundling part of the business. We’re interested in expanding that,” the chief executive officer of Netflix, Reed Hastings, said in a conference call after the release of financial results in July.

Mutually beneficial

The partnerships will not only be beneficial to cable operators but to Netflix as well as the video streaming firm will be able to increase its subscriber numbers especially in the U.S. Analysts have already said that the market has reached saturation levels in the U.S. while there is growth being recorded in foreign markets.

In its most recent earnings report Netflix indicated that the number of streaming customers in the U.S. was 51.92 million while the number of customers in other parts of the world was 52.03 million. When Netflix first started offering a streaming service in 2007, television providers saw it as a challenger and it is only now they are viewing it as a partner who could benefit them as well.

On Friday shares of Netflix rose by 0.58% to close at $180.27.

Leave a Reply

Your email address will not be published. Required fields are marked *