Netflix focusing on Internet-based service

Nov. 25, 2010 at 10:24 AM
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NEW YORK, Nov. 25 (UPI) -- For the first time, cable television subscriptions fell in the United States in the last two quarters, a trend some attribute to California-based Netflix.

The Netflix business model was based on mail-order DVD movies, but the Internet and the ability to bypass a cable box and stream movies directly to a subscriber's television set puts it ahead of the competition -- for now -- The New York Times reported.

"Right now, Netflix is a distribution platform, and has very little competition, but that's changing," said Warren N. Lieberfarb, a consultant who help develop the DVD while at Warner Brothers.

Changing from a mail-order company to a technology-based company revolutionizes the way millions of people watch television, and makes Netflix a competitive threat to movie studios, who sell it their content, the report said.

As Netflix continues to evolve, its stock has quadrupled from its 52-week low in January, and it now has a market value of nearly $10 billion, making it worth more than some of the Hollywood studios that license movies to it.

Netflix and its streaming technology arrived at a time when the film industry's primary source of profits, the sale of DVD's, is dropping, the report said.

"As the home entertainment industry comes under pressure, they are the only guy standing there in a red shirt writing checks," said Rich Greenfield, an analyst at BTIG Research. "That makes Netflix really unique right now."

Netflix spent nearly $1 billion to stream movies from three Hollywood studios -- Paramount, MGM and Lionsgate -- in the past few months.

Steve Swasey, vice president for communications at Netflix said, "As we move from paying U.S. postage to acquiring movies and television episodes from the studios and networks, Netflix can become one of their top customers."

Netflix has 16 million subscribers and Monday announced a new subscription service: $7.99 a month for unlimited downloads of movies and television shows.

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