Netflix Inc. (NFLX) recently signed a new multi-year licensing agreement with Hollywood studio Metro-Goldwyn-Mayer Studios Inc (MGM). Under the terms of the agreement, Netflix will obtain the license to exclusively stream movies produced by MGM in the United Kingdom and Ireland.
Earlier, Netflix had announced its intentions to enter the United Kingdom and Ireland by early 2012. Netflix subscribers in these regions will be able to watch popular MGM movies, such as “The Hobbit: An Unexpected Journey" and "The Hobbit: There and Back Again”, "Zookeeper", "Hansel & Gretel: Witch Hunters," and "21 Jump Street," within the first year of their theatrical release by paying a monthly fee. Moreover, MGM’s vast catalogue of movies will also be available for the United Kingdom and Ireland subscribers.
Netflix has been consistently pursuing international expansion to boost its top-line and earnings growth over the long term. As a part of its expansion strategy, the company launched operations in 43 Latin American countries and in the Caribbean region in September this year.
However, entry into the United Kingdom is particularly significant due to the country’s very high level of Internet penetration (approximately 77.0% of households) and access to broadband Internet or video game consoles compared to the Latin American and Caribbean regions. Moreover, the number of persons using debit and credit cards is also high in comparison to Latin America.
We believe the partnership with a renowned studio such as MGM will help Netflix expand further into new territories. The company has been active in signing licenses and has been partnering with several big Hollywood production houses, such as Paramount Pictures, Twentieth Century Fox, Disney-ABC Television Group, DreamWorks Animation and Miramax studios, for new content additions.
We believe that these content additions will enable Netflix to reduce its dependence on cable TV operators and also provide the necessary competitive edge over its peers in the emerging market of online video streaming. Netflix expects to remain profitable on a global basis for the fourth quarter of 2011, primarily based on the new content additions, which will have a positive impact on existing subscribers in the domestic market and add new subscribers to its international ventures.