Amazon, Verizon throw wrench into Netflix's plans

New movie-streaming ventures could mean serious trouble.

By Trefis Feb 15, 2012 1:59PM
Image: Hollywood (© Comstock/SuperStock)While Netflix (NFLX) hopes to expand further into international markets, it looks like the online movie-streaming company will face more competition at home.

Verizon
(VZ) recently announced a joint venture with Redbox to launch a streaming service, and now Amazon (AMZN) seems to be planning a stand-alone video-streaming service.


So far Amazon's video-streaming service has been a free add-on for customers who subscribe to Amazon Prime service, which makes them eligible for free shipping in exchange for an annual subscription fee. If the service becomes stand-alone, it would imply more money will be pumped into content. This could pose some serious trouble for Netflix and slow future subscriber growth.


Netflix US Streaming Subscribers

On the other hand, international prospects look good. The U.K.'s major pay-TV service provider Virgin Media has stated that the company is talking to several video-streaming service providers to add TV shows and movies to its TiVo recording service. This includes Netflix, and it could help the company expand more smoothly in this new geography.


Moreover, Netflix seems to be exploring entry into the Russian market, according to a report. The international opportunity is huge and Netflix could begin expanding to other international markets in the second half of 2013.


Overall, the era of self-made troubles is over and the company will now need to demonstrate good business acumen to beat competitors. We think that the stock is more or less near it fair value, and high stock growth from this point is unlikely given the increasing content costs and growing competition.


Our price estimate for Netflix stands at $133, implying a a premium of about 10% to the market price. See our complete analysis for Netflix.

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