Netflix Shares Tumble on Comcast Streaming Announcement

 @ibtimes
on February 22 2012 11:55 AM
The headquarters of Netflix is shown in Los Gatos
The Netflix headquarters shown in Los Gatos, California in 2011. REUTERS

Shares of Los Gatos, Calif.-based Netflix Inc. (NFLX) fell more than five percent Wednesday following an announcement by Comcast Corp. (CMCSA) it was jumping into the online streaming business.

Netflix shares fell $6.28 to $111.12 in midfaternnon trading.

Comcast announced Tuesday it planned to offer a streaming service, Streampix, to its cable subscribers. The Philadelphia-based cable company cut licensing deals with programming providers, including Disney-ABC Television Group, NBCUniversal, and Sony Pictures.

Comcast is not the only company likely to give Netflix problems. Verizon Communications and Coinstar, parent of DVD-kiosk company Redbox, earlier this month announced a joint venture to provide streaming service. Unlike Comcast, those without Verizon's cable services will be able to utilize that streaming service.

Amazon.com has also posed a challenge to Netflix with its Amazon Prime streaming library. The Seattle-based retailer recently announced a streaming deal with Viacom that expanded Amazon's streaming library by about 15 percent.  

Although Netflix has a sizeable and likely insurmountable lead on its competition in terms of both content and users, competition in the streaming media industry is heating up and making incremental growth going forward harder, Bank of America Merrill Lynch analyst Nat Schindler said in a recent research note.

Netflix has pursued exclusive content deals with movie production companies to push back against competition. One success in that area has come with Weinstein Co. Netflix subscribers will get exclusive access to foreign-language, documentary and other movies from Weinstein, producers of The Iron Lady and the Academy Award-nominated film The Artist, under a multiyear licensing agreement. Terms were not disclosed.

The company is also creating exclusive content. Earlier this month, it released the first of five original series, Lilyhammer, starring Steven Van Zandt, who played a mobster on The Sopranos and remains a member of Bruce Springsteen's E Street Band.

Netflix had 24.4 million subscribers in the quarter ended Dec. 31.

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