Netflix strikes out in its search for pay TV partners

What about Time Warner? A partnership with the cable company would be a good idea.

By Trefis Mar 14, 2012 2:19PM
Image: Businessman watching television (© Image Source/Corbis)Netflix's (NFLX) proposals for partnership with a pay-TV company have reportedly been turned down by some of the big names in the business, including DirecTV (DTV), Dish Network (DISH) and Comcast (CMCSA).

This is no surprise. We noted before that it was unlikely any of these companies would partner with Netflix. We pointed out that Time Warner Cable (TWC) was the only potential partner for Netflix among the major cable companies. But we have yet to see any developments between the two companies over the matter. Why? 


Netflix US Streaming Subscribers

Time Warner Cable has close to 12 million subscribers. It is not known how many of these already have Netflix subscription. However, if the two companies partner and Netflix gains close to half of these subscribers in next three years or so, this will imply a net addition of 6 million subscribers.


Let's assume that close to 40% of these are already reflected in our forecasts. This means that a gain of close to 3.6 million subscribers could be incremental to our forecasts in the span of next 3 years. This could lead to an upside of close 8% to our price estimate for Netflix.


Although there are certain assumptions involved in the above calculation, one can be certain that there is definitely some meaningful gain that would come out of this partnership. Even if it is not an incremental gain, it could definitely prove to be a hedge against increasing competition.


Our price estimate for Netflix stands at $133, and implies a premium of about 20% to the market price.

1Comment
Mar 14, 2012 3:34PM
avatar
you assume a partnership then base some bizarre increase in stock price based on it.  and you don't take into account people leaving nflx - which can't be documented now that nflx won't release the numbers.  i'm reading professional analyst looking at 80 or below.  someone is in the wrong reality.
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