Microsoft Is No Netflix Killer

Like most September days for Netflix (Nasdaq: NFLX  ) shareholders, the video giant is having another rough outing today.

The stock is trading as much as 7% lower this morning, partly on a Bloomberg article detailing Microsoft's (Nasdaq: MSFT  ) push into online television. According to the report, Microsoft is talking to dozens of premium television and content providers to beef up its Xbox Live platform.

Comcast's (Nasdaq: CMCSK  ) Xfinity and Verizon's (NYZE: VZ) FiOS are two giants here, though Microsoft is talking to individual cable channels including SyFy and Time Warner's (NYSE: TWX  ) HBO. Amazon.com's (Nasdaq: AMZN  ) European Netflix-like Lovefilm service is also being singled out, so Microsoft isn't just talking about a stateside service for its tens of millions of Xbox Live subscribers.

It's easy to see where this may come off as problematic for Netflix, but much of this is largely the logical evolution of the TV Everywhere initiative Comcast and Time Warner have been championing for two years.

In other words, Comcast, Verizon, and HBO aren't going to let Xbox users check out their content on a stand-alone basis. They will have to be existing subscribers. Last I checked, I wasn't paying Comcast $7.99 a month!

It's also important to remember that Microsoft's push -- transforming Xbox 360 consoles into lifestyle boxes -- isn't new. Microsoft has been selling online video for years to Xbox Live users and in fact is now losing market share in that space.

This won't replace traditional television service; its partners won't let that happen. Unless you have just one TV in your home, I don't know many people with an Xbox 360 tethered to every single TV they own.

So how is this the end of Netflix, whose service also will be part of this reported rollout? Netflix CEO Reed Hastings still sits on the Microsoft board, right? This isn't taking him by surprise.

If you want to follow this saga, track the latest news by adding Netflix to My Watchlist.

The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Netflix, and Amazon.com, as well as creating a bull call spread position in Microsoft and a bear put spread position in Netflix. 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. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber and shareholder since 2002. He does not own shares in any of the other stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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