Netflix - Apps, Hardware And The Cable Box

Jun.26.14 | About: Netflix, Inc. (NFLX)

By Vikas Shukla

Netflix, Inc. (NASDAQ:NFLX) has succeeded at getting its service integrated into many hardware offerings. The company has apps for tablets and smartphones. Its integration into several blue ray players, and with most of the Over-the-Internet offerings such as Chromecast, Apple TV and Fire HD have made it extremely easy to stream Netflix content.

Integration into the cable box next big opportunity for Netflix

Barclays analysts Paul Vogel and Michael Urciuoli said in a research note that the next big opportunity for Netflix is to get its service integrated into the cable box. Barclays has initiated coverage of the stock with Underweight rating and $420 price target. The move will allow Netflix to become a TV channel that users can access as they would any other channel. That would make it easier for consumers to access Netflix.

The Los Gatos-based company would also see performance benefits as its content will be riding on TV bandwidth, providing consistently high-quality offering. Netflix has signed deals with some smaller companies. But Barclays believes large cable operators are likely to integrate with Netflix anytime soon. That’s because, with some obvious benefits, there will be numerous drawbacks.

Most large players are trying to insert ads in conjunction with their video-on-demand offerings. Bringing Netflix to the cable box would negatively impact them. There will also be advertising, rights and content issues. Besides cable box, there are many other hardware products that Netflix can explore. Of course, the more offerings the better, but Barclays says that it doesn’t expect any new hardware products to materially affect the company’s subscriber numbers.

Will Netflix develop its own hardware product?

Netflix seems uninterested in developing its own hardware product. However, Vogel and Urciuoli say that it’s not out of the realm of possibility. In the U.S. market, the company is comfortable that most hardware products come with Netflix as pre-loaded on them. In international markets, the Internet streaming company may develop a low-cost product to help grow the market. Netflix currently has 35 million subscribers in the U.S., and the company aims to increase it to 90 million.

Disclosure: None.