Summer is kicking into full gear, and while you might think that means beach parties, barbecues, and slowly baking in the sun, it also means big business for the movie industry. Not just theaters, either. It means that thousands of families, whether by passing the kids a smartphone for quick and easy car-ride entertainment or in the living room, will be watching Netflix (NASDAQ: NFLX).
Summer 2010 was a crucial moment for the streaming video company, when it first offered streaming-only subscriptions free of by-mail DVD rentals. The program kicked off in Canada, was available in the U.S. by fall, and propelled Netflix to success it had never known before. The company swelled to more than 20 million subscribers. At the beginning of summer 2010, shares in the company were trading below $100. In July 2011, they’re trading above $260.
What’s next? Netflix can’t exactly redefine an entire industry two years in a row, so what does the company have up its sleeve to guarantee that it will continue to grow and control the streaming video business?
Bolstering its content selection is what Netflix is focusing on as opposed to bold changes to its business model. The company signed a deal with Miramax on June 1, bringing classics like Pulp Fiction to the service for the first time, but that film studio also brought its wares to Hulu. That streaming video service and website, partly owned by Comcast (NASDAQ: CMCSA), Disney (NYSE: DIS), and News Corp. (NYSE: NWS), commands a fraction of Netflix’s paid user base but it still represents a potential threat to Netflix’s dominance. Hulu actually stole away the exclusive rights to The Criterion Collection library of films from Netflix earlier this year.
It’s that drive for exclusive content that consumers can’t get from any other streaming service that’s driving Netflix right now. GigaOM recently reported that Netflix closed a deal with Open Road Films, a company backed by AMC Theaters and Regal Entertainment Group (NYSE: RGC), the biggest theater operators in the U.S. The partnership will allow films available as streaming options only through Netflix. Additionally, they will be available on Netflix at the same time as premium cable channels like HBO.
HBO seems to be the business that Netflix is hoping to model itself after. Not only is it working overtime to offer its subscribers a large selection of exclusive television and movies, it’s getting into the business of high profile original programming as well. A March Wall Street Journal report said that Netflix is funding an American adaptation of the British political drama House of Cards with actor Kevin Spacey and Social Network-director David Fincher behind the project. It’s just the sort of serious, big-talent programming that has gained HBO such a fervent audience in the past fifteen years.
This is the Netflix of now. While there are hints of how the company will change up its business in the future — “Family Plans” that let households watch multiple programs on a single account, advertising-supported subscriptions — the name of the game now is giving people more of what they clearly want. It’s a plan that’s working just fine.
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.
