Streaming videos has paid off for Netflix. On Tuesday, the company’s shares closed at $270.80, a record high for the Los Gatos-based company, and almost 15 percent higher than their close at the end of April. Over the past 52 weeks, Netflix has ranged from $95.33 per share to yesterday’s record closing.
The disappearance of Blockbuster and the introduction of streaming videos is a major factor in the company’s growth spurt. Evidence that the concept has caught on is seen in the company’s dominance of broadband internet traffic during peak hours across the U.S. and Canada. Netflix accounts for 29.7 percent of all data downloaded in that time.
But this is only part of the story. Netflix has recently also entered into lucrative deals with major Hollywood studios to stream hundreds of their most popular titles to Netflix subscribers. A deal signed with Miramax may have reportedly been worth about $100 million to the studio, and it could have been worth more had the studio agreed to an exclusive deal with Netflix.
Of course, this leaves Netflix open to competition from other high-tech giants such as YouTube, Apple and Amazon. Google, for example, which owns YouTube, has signed agreements with a number of studios such as Sony and Lion’s Gate.
But Netflix is fighting back by partnering with Facebook. Andy Hargreaves, an analyst with Pacific Crest Securities, says that, “Facebook integration could boost global subscriber growth. 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.” With Facebook making inroads in Brazil and about to hit 700 million users, that could be a lot of incremental new business for Netflix.
It fits in with Facebook founder Mark Zuckerberg’s philosophy behind what drives social media: “Music, TV, news, books—those types of things I think people just naturally do with their friends. I hope we can play a part in enabling those new companies to get built, and companies that are out there producing this great content to become more social.”
That makes the partnership between Netflix and Facebook a win-win situation for both.