Netflix Inks 4-Film Deal with Sandler to Add Subscribers
Netflix Inc. (NFLX) is now aggressively venturing into movies. After partnering The Weinstein Company (“TWC”) for exclusive streaming of the sequel of Crouching Tiger, Hidden Dragon, the company recently signed a four-film deal with renowned Hollywood actor, Adam Sandler. All the four films will exclusively premiere on Netflix.
Per the current agreement, Sandler will produce as well as feature in all of the four films which are likely to be comedies. The films will be shown in the 50 odd nations where Netflix operates.
According to the deal, the first movie, set to be jointly developed by Netflix and Sandler’s Happy Madison Productions, is scheduled to be released in late 2015. Per Netflix, Sandler was chosen on the basis of his huge global popularity among audience of all age-groups, worldwide.
The aforementioned distribution deal with TWC will enable Netflix to stream the upcoming Crouching Tiger, Hidden Dragon sequel simultaneously with the film’s release at select IMAX theatres on Aug 28, 2015.
According to The New York Times, these deals will help Netflix change the “traditional method of releasing films — first in theaters then, typically several months later, for streaming.” However, this will be a challenging task for Netflix given that none of the big studios or theater chains is currently involved in the process.
Nevertheless, we believe the new initiative will beef up Netflix’s subscriber base in the long run. The simultaneous or exclusive premiere of movies on the Netflix platform will be a big attraction for subscribers, particularly in the international markets where Hollywood movies take some time to release.
We believe Netflix’s engaging content library, which offers an eclectic mix of original and third-party shows is its biggest growth catalyst. The company continues to expand its content library by signing new deal with the likes of CBS Corp (CBS), Rainbow Studios, Dreamworks Animation, Mattel (MAT) and Walt Disney (DIS).
Although rising costs related to content and international expansion are a major headwind, we believe a fast-growing subscriber base will help drive Netflix’s top line in 2014. Additionally, price increases (for both domestic and international new users) should help the company offset higher expenses in the near term.
Currently, Netflix has a Zacks Rank #3 (Hold).
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