| NEW YORK
NEW YORK Netflix, the DVD-by-mail rental
service, on Tuesday took another step toward delivering films
straight from the Web to TV sets through a new device, boosting
its stock as much as 10.9 percent.
The $99.99 (50 pound) device lets Netflix subscribers
"stream" movies and television episodes to their TVs with no
extra charges or viewing restrictions, the company and its
partner, Roku, said in a statement.
Forrester analyst James McQuivey called the move a salvo in
the "coming war over the territory known as the consumer living
"While it's too early to call winners and losers -- this
battle should rage through all of 2009 and into 2010 -- it's
clear that training millions of consumers to prefer you sooner
rather than later is the best strategy," he said.
Lehman Brothers analyst Douglas Anmuth upgraded Netflix's
stock, which rose as high as $34.35, to "overweight" from
"equal weight," noting that the company was benefiting from
strong subscriber trends.
Anmuth boosted his 2008 profit-per-share forecast for
Netflix to $1.26 from $1.24, and raised his price target for
the stock to $37 from $31 -- 19 percent above the $30.98
closing price on Monday.
The paperback-sized Roku player requires an Internet
connection, and also works with wireless connection systems
through Wi-Fi technology. Users can fast-forward and rewind the
video streams with a remote control, Netflix said.
More than 10,000 movies and television episodes are
available through the player, just one-tenth of the more than
100,000 titles in the traditional Netflix service in which
movies are ordered online and shipped by mail.
Netflix said in January it also was developing a set-top
box with LG Electronics Inc to let subscribers watch movies
streamed from the Web to their TVs.
Netflix's chief rival, Blockbuster, is also expected to
provide a similar service, analysts said.
Several other companies are exploring streaming Web video,
including Vudu, Apple, Microsoft through its Xbox game console,
and TiVo, all with varying amounts of material available.
But analysts cautioned that the market was still in its
"The problem is that with a box like this, history suggests
that very few people are going to use it and buy it," JPMorgan
analyst Barton Crockett said. "Similar boxes from companies
like Apple have gotten limited traction despite good reviews."
"It sounds like a nifty device for leading-edge kinds of
early adopters," he said. "I think for mainstream consumers,
most people really don't want another box in (their) living
Last month, some Wall Street analysts who follow Netflix's
financial performance said the company needed to start charging
customers for its free online streaming service.
Netflix's stock fell more than 20 percent one day in April
after it warned that gross margins would remain flat for the
next two quarters as it continues to spend more for online
content for its Watch Instantly streaming service, which it
offers free to subscribers.
Anmuth said he expects Netflix to enjoy strong
second-quarter subscriber growth, and for subscriber
acquisition costs and churn "to trend lower as Netflix benefits
from the more favourable competitive landscape along with
increased word-of-mouth and more attractive marketing
Netflix shares rose $1.02, or 3.29 percent, to $32.00 on
Nasdaq late Monday afternoon.
(Additional reporting by Jonathan Stempel in Bangalore and
Sue Zeidler in Los Angeles)