Earlier this week, Netflix (NASDAQ:NFLX) shares dropped on the news that Facebook had cut a deal with Warner Bros. to offer Batman flick Dark Knights to its members as a VOD offering. Investors immediately began a sell off, convinced Netflix was going to be hurt by the Facebook effect. Today, a different story; Neflix shares are up a couple of points on rumors that Netflix may be working with Facebook.
Pacific Crest Securities analyst Andy Hargreaves issued a report that said the two were, in fact, at work to integrate the online entertainment distributor onto the social media behemoth's website.
"Facebook integration could boost global subscriber growth," he said. "We believe Netflix is working with Facebook to tightly integrate Netflix into Facebook's platform. This could help increase time spent in Facebook and drive incremental Netflix subscribers domestically and in new international markets."
While Netflix currently has only a single international market, it launched in Canada last year, the company has said it plans to aggressively roll out more markets around the world this year, ballyhooing what it says has been a very successful foray into the Great White North. And, it needs to act relatively quickly. Several of its competitors also are eyeing international expansion as well, most notably Amazon, which last month acquired LOVEFilms, which is based in the United Kingdom and has a rather large footprint in Europe.
"We believe that, on top of its existing momentum, the company is working with Facebook to launch deeper integration of Netflix into the Facebook platform," added Hargreaves. "The first stages of these efforts are likely to launch within the next few months, and we believe they could drive incremental subscriber growth domestically while helping to accelerate Netflix's international expansion."
Netflix currently has 20 million subscribers in the U.S., and that number should top 23 this quarter. Facebook, by comparison, has some 600 million users.
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Netflix Q4 earnings: 20 million subscribers; revenue of $596 million