Netflix Inc. (NFLX) recently bought the exclusive U.S. video-on-demand rights for CBS Corp’s (CBS) drama series Zoo, set to release in summer 2015. The full series will be available to Netflix subscribers immediately after it concludes on CBS.
The television drama is based on a novel by James Patterson published in 2012. The story follows a young biologist trying to fathom the plausible cause behind violent animal attacks on humans across the planet. The novel won critical acclaim and was a New York Times best seller.
Reportedly, the current deal is expensive for Netflix, as it is paying more than $1.0 million per episode that Amazon.com (AMZN) paid for Under the Dome and Extant. Growing content cost has been a major headwind for Netflix, as it continues to expand its library to counter intensifying competition from Amazon, Hulu and HBO.
However, an engaging content library that offers eclectic mix of original and third-party shows is the biggest growth catalyst for Netflix. The company is increasingly focusing on steaming kids’ shows, which has tremendous growth potential.
Netflix itself recognizes the fact that kids make up a significant chunk of TV show and film viewers. To attract kids, the company is working with DreamWorks Animation to include original cartoon series in the service and has a similar kind of deal with Mattel (MAT).
Simultaneously, the company is improving adult viewing options that will drive subscriber growth. Netflix recently signed a deal with renowned comedian and actress, Chelsea Handler, to create a new talk-show slated for a 2016 launch. It also revived The Killing for a final season.
Netflix’s partnerships with major film studios and production houses like The Wachowskis (creators of The Matrix trilogy), J. Michael Straczynski (Babylon 5), Gaumont International, Sony Pictures, The Weinstein Company and Walt Disney are also expected to further expand its content library in 2014 and beyond.
Although rising costs related to international expansion is another major headwind, we believe that fast growing subscriber base will drive the top line this year. Additionally, Netflix’s recent price increases (for both domestic and international new users) will help the company to offset higher expenses in the near term.
Currently, Netflix has a Zacks Rank #3 (Hold).
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