Netflix (NASDAQ: NFLX ) kicked off the week by locking down another content deal, this time with DreamWorks Animation (NASDAQ: DWA ) . Both stocks traded up on the news, with shares of Netflix climbing more than 7% to around $229 on Monday. The streaming-video giant nabbed 300 hours of original programming in the deal. However, with Netflix stock already up more than 147% so far this year, will the stock's momentum continue?
The DreamWorks deal gives Netflix a much-needed edge against rivals like Amazon.com (NASDAQ: AMZN ) and Coinstar in the streaming space. Importantly, the deal brings more kids-focused material to Netflix arsenal of original content. Shrek, Kung Fu Panda, and How to Train Your Dragon are just a few of the DreamWorks franchises that Netflix can now leverage against competitors.
While this deal is certainly Netflix's largest original content deal to date, it shouldn't be a complete surprise. Let's not forget that Netflix shoved Viacom (NASDAQ: VIAB ) into the arms of the competition last month. Amazon was quick to ink a multiyear content agreement recently with Viacom, after Netflix failed to renew its contract with the content provider. As a result, Amazon scooped up popular children's programs including Dora the Explorer and Blue's Clues.
Thanks to Netflix recent partnership with DreamWorks, both Amazon and Netflix now have strong kids' lineups -- a key category in the video-streaming world. For Netflix, the deal also enhances its relationship with DreamWorks, a company that's known for its feature length animated films. Together with DreamWorks, Netflix plans to release its first original series for kids later this year. The show titled Turbo F.A.S.T will be based on DreamWorks' upcoming animated film Turbo, which debuts next month.
The future of Netflix
Teaming up with DreamWorks was enough to push shares of Netflix higher this week. However, longer term, Netflix will need to continue investing in original content if it wants to keep winning. That could be a tall order considering content isn't cheap these days. Netflix coughed up an estimated $100 million for its hit series House of Cards, whereas Amazon reportedly dished out $200 million for content from Viacom.
With competitors bidding up the cost of content, Netflix stock could hit some turbulence if it starts overpaying to beef up its content library.
The tumultuous performance of Netflix shares since the summer of 2011 has caused headaches for many devoted shareholders. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why The Motley Fool has released a premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments, so make sure to click here and claim a copy today.