Netflix Inc. (NFLX) will stream the second season of its original horror series Hemlock Grove in 2014, produced by Gaumont International Television. The second season will consist of 10 episodes and is expected to go into production later this year.
Hemlock Grove is a horror thriller that unravels the mysteries of a small Pennsylvania town. In the second season, Charles H. Eglee (of The Walking Dead and Dexter fame) will join the series as executive producer.
The first season of Hemlock Grove did not receive as much appreciation as Netflix’s other original shows such as House of Cards and Arrested Development. Hemlock Grove received mixed reviews from critics and was reportedly a flop in terms of viewership.
In such a scenario, a second season comes as a surprise to many. However, we believe that Netflix is targeting a particular group of audience through its choice of productions. Through its original television shows, Netflix has been venturing into different genres like comedy, political thrillers, autobiographies and horror.
For instance, Netflix’s partnership with DreamWorks Animation SKG (DWA) will help it to reach out to kids through an original series, Turbo: F.A.S.T. (Fast Action Stunt Team). This original series will be available for streaming from December in the U.S. and abroad.
Both the companies recently signed a new deal, which will allow Netflix to stream over 300 hours of new programs based on characters from DreamWorks’ portfolio of popular films. Netflix will air these shows in 40 countries beginning 2014.
In March, Netflix commissioned a sci-fi show called Sense 8, which will bring together the Wachowskis (creators of The Matrix trilogy) and J. Michael Straczynski (the creator of television series Babylon 5) for the first time.
Netflix’s growing offerings in the original program series is expected to diversify its online content and help it stand out among other streaming content providers such as Amazon (AMZN), HBO, Hulu and Comcast Corp (CMCSA).
We believe that these initiatives will be incrementally beneficial for the company, helping it to add new subscribers and retain the older ones, going forward. This is indicative of the fact that in the last-reported quarter, Netflix added 2.03 million streaming subscribers in the domestic market and 1.02 million subscribers in the international market.
However, higher costs owing to international ventures and licensing fees and continued subscriber losses in its DVD business are near-term headwinds. Loss from the international business, due to higher content and marketing costs, is another concern in the short term.
Nonetheless, we believe that new streaming content deals and its original content portfolio should be able to attract new subscribers both in the U.S. and international markets.
Currently, Netflix has a Zacks Rank #3 (Hold).
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