Netflix Gets Bigger and Bigger

All eyes are on Netflix (Nasdaq: NFLX  ) after its decision to bump rates higher for its monthly movie plans with a streaming component.

The one shortcoming of tapping Netflix's digital library is that it's a bit barren of new releases, but the dot-com darling is trying to tackle that void -- one deal at a time.

This morning's streaming deal is with FilmDistrict, providing Netflix subscribers with access to its flicks during the "pay TV window" that takes place shortly after a studio's movie hits the DVD market. In other words, Netflix will be streaming the FilmDistrict titles once they would normally become available to the premium cable channels.

The first two films to be offered as part of this morning's arrangement are Drive and Lockout.

If you don't recall seeing either film at the corner multiplex, you're not alone. Drive is still in post-production and won't hit the silver screen until next year. The sci-fi adventure flick Lockout may not even hit theaters until 2012, according to IMDB.com. In other words, it will take about a year before FilmDistrict productions begin raining down to Netflix's 16 million subscribers.

We don't know if we'll even want to see Drive and Lockout. They may very well bomb at the box office. However, that's also the point behind Netflix inking as many digital distribution deals as it can. As its selection grows from its current offerings of roughly 20,000 titles, there should always be something relevant worth watching.

This deal may be smaller in scope than the ones it has already inked with Relativity Media, Liberty Starz's (Nasdaq: LSTZA  ) Starz, and Epix, but it's one more way for Netflix to broaden its digital library at a time when no one is even close to aping its model.

Amazon.com (Nasdaq: AMZN  ) and Apple (Nasdaq: AAPL  ) continue to push piecemeal video rentals. Coinstar's (Nasdaq: CSTR  ) Redbox promised a digital strategy announcement in October, but that proved to be as anticlimactic as a Katherine Heigl flick.

The closest match to Netflix may be Time Warner's (NYSE: TWX  ) HBO Go, but that streaming service is only available to those already paying for HBO on top of their chunky cable bills.

Netflix knows what it's doing. Its drive is to lockout the competition.

Can anyone truly overtake Netflix in digital distribution? Share your thoughts in the comment box at the bottom of this queue.

Apple, Amazon.com, and Netflix are Motley Fool Stock Advisor recommendations. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber -- and shareholder -- since 2002. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (12)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 01, 2010, at 6:40 PM, mattack2 wrote:

    Flop and "want to see" are unrelated concepts, yet the article seems to consider them related and/or causal.

  • Report this Comment On December 04, 2010, at 12:48 AM, Rouleur wrote:

    Well, what I think is more important, is that as NFLX gets "bigger and bigger" can the higher margins from streaming and what they hope is continued high growth in subscribers allow them to get the content needed to keep subscribers happy, gain newer subscribers, and retain the differentiation needed against the cable companies and studios that surely won't make it easy.

    I just sold my shares at $200 because at that valuation it assumes that they will march forward without obstacles, which I feel isn't likely. I am a fan of NFLX and the stock but I think they will have growing pains but in the end will be a winner.

    Look for some volatility going forward and possibly much more attractive entry points. In the meantime, I am a fan of the service.

  • Report this Comment On December 11, 2010, at 7:02 AM, ggh3 wrote:

    in looking at the financials of netflix, it seems a bit overpriced to me. yes, the company on paper over the last 5 years has shown steady growth in revenues. However, can this company really be worth the astronomical evaluation the market has placed upon the stock?

    As a netflix subscriber of the last 5 years, I have been extremely pleased with the service until 6 months ago. Yes, there was a delay in getting new release movies compared to other services, but that was okay with me. My issue came recently(and I am no longer a subcriber) in that when they finally did get the new titles, the service went from a week or two in delivering the movie titles, to two or three months before delivering the movies.

    Just think the growth factor might catch up to them.

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