Ahead of the Bell: Netflix-PlayStation deal

posted: 32 DAYS 5 HOURS AGO

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NEW YORK -DVD rental company Netflix Inc. is betting that its plan to stream content to users' TVs through the PlayStation 3 gaming console may help it win millions of new customers, but the deal's benefits are uncertain as competitive threats from other digital content providers remain, said a Janney Montgomery Scott analyst.

The deal with Sony Corp., which sells the PlayStation device, was announced Monday. Thousands of movies and TV episodes from Netflix's collection will be streamed through PlayStation 3 consoles with no additional charges to the monthly subscription fee from Netflix.

The service will be available in November.

Netflix shares rose 12 percent last week, which "largely discounts the new deal," said analyst Tony Wible in a note to investors Monday. He added that uncertainty around timing, the potential for increased costs and overlap with subscribers who already stream Netflix content through their Xbox 360 gaming devices make judging the deal's benefits tough.

Shares rose $1.26, or 2.3 percent, to $56.15 in premarket trading.

"We ultimately see (Netflix) being hurt," Wible wrote, due to competitive pressures from Redbox, which rents DVDs for $1 per night from in-store kiosks, and the increasing amounts of video available from Internet downloads and cable TV providers. He reiterated his "Sell" rating on the company.

Redbox is a subsidiary of Bellevue, Wash.-based Coinstar Inc.

For Netflix, the deal brings millions of potential new customers. It already has 11.1 million users in the U.S. About 9 million PlayStation 3 systems have been sold in U.S., and more than 25 million worldwide.

Netflix streaming is already available on other devices, such as the Xbox, the Roku digital video player, Internet-connected TV sets and Blu-ray players.

2009-10-26 09:31:37