A new deal by Netflix (NASDAQ: NFLX ) to distribute more than 700 movies from
Miramax via its streaming video service shows that more content producers are
realizing that its more important to work with Netflix rather than against them.
Make no mistake Netflixs partnerships are essential to its continued growth and
success. Shareholders who have stuck with the company throughout its dramatic
transition from DVD rental business to streaming video industry leader may not
realize how vital it is for Netflix to find new partners while maintaining old
relationships. But keep in mind that the company grew to 20 million subscribers
in 2010 thanks to its amount of content as much as its ease of access and cost.
Research firm Brand Keys annual survey of consumer brand loyalty published in
February ranked Netflix No.1 out of 528 brands thanks to its ability to delight
consumers. But despite a huge stock runup, Netflix is at a crossroads. As
content partners like Miramax embrace the company, others are clinging to their
shows and movies hoping to enhance their value. Showtime Networks said last week
that it is pulling some of its original television content like Californication
and Dexter from Netflix prior to the summer signing of a new content deal.
Netflix needs to strengthen old ties and forge new bonds to keep subscriber
growth healthy in 2011. Here are two new partnerships the company needs to
pursue, and two existing ones that it needs to strengthen. HBO The home of such
massive hits as The Sopranos and Six Feet Under will be the crown jewel of
Netflixs streaming service when it finally secures a deal. Unless a competitor
makes significant headway against Netflix, its a matter of when, not if, HBO
comes to Netflix. HBO, owned by Time Warner (NYSE: TWX ) has been keen to stay
independent of other streaming outlets, starting up multiple services like HBO
On Demand through cable service and HBO GO as a devoted streaming competitor on
smartphones and Web browsers. A parternship with Netflix would ultimately
benefit the company, though, as licensing fees would help fill the gap left by
dwindling DVD sales. The sooner this partnership is forged, the better for both.
The Criterion Collection Netflixs instant-streaming service did offer Criterion
Collection films like Rushmore and Seven Samurai until the distribution company
left the company for Hulu in February. This means that Netflix needs a new
agreement with a lost partner, rather than a brand new collaborator. Not only
does Netflix need to recapture the Criterion Collections film library, it needs
to leverage the same supplementary content such as documentaries and other
features that has made the Hulu partnership such a promising lure for audiences.
Netflix needs to begin filling out the range of services available through
instant streaming, and reconnecting with the Criterion Collection is the place
to start. NBC Universal NBC television content, now majority-owned by Comcast
(NASDAQ: CMCSA ) has been a strength of Netflixs instant-streaming service since
began, but it could be emboldened significantly with more content. NBC has
been desperately searching for ways to improve viewership hoping to recapture
the glory days of its 1990s programming schedule. A good way to do this is to
re-evaluate its current licensing deals with Netflix, and bring more new content
to the service that still have growing audiences, as well as legacy content.
News Corp.s (NYSE: NWS ) Chase Carey already said that Netflixs strength is
going to reduce syndication fees . Its time to discuss bringing syndication
giants like Seinfeld to Netflix. Netflix can, in turn, start considering
multiple tiers of subscription to add premium fees to extra content like NBC
legacy programming. Disney (NYSE: DIS ) Netflix has already made bold steps to
strengthen its relationship with Disney. A December deal between the two
companies brought ABC and Disney Channel television to the streaming service. As
with NBC Universal, Netflix has an opportunity to strengthen its ties with
Disney by testing more subscription options, offering access to a broader range
of content for a higher fee. By giving Netflix subscribers access to a complete
archive of Disneys animated features, both companies would see financial
benefits in the form of higher subscription and subsequently licensing fees. As
of this writing, Anthony John Agnello did not own a position in any of the
stocks named here. Follow him on Twitter at @ajohnagnello and become a fan
of InvestorPlace on Facebook.
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