Thursday September 3, 06:42 PM
Netflix, Blockbuster shares fall on YouTube deal
LOS ANGELES, Sept 3 (Reuters) - Shares of movie rental
companies Netflix Inc (NASDAQ: NFLX - news) and Blockbuster Inc (NYSE: BBI - news) fell
on Thursday, dragged down by news that online video site
YouTube is talking with several major movie studios about
renting movies, analysts said.
Shares of Netflix fell about 4 percent to $40.10 while
shares of Blockbuster declined about 10 percent to $1.08.
A deal between YouTube, owned by Internet search giant
Google Inc (NASDAQ: GOOG - news) , and studios could pose stiff competition
to Netflix's online streaming service and movie rental
retailer, Blockbuster.
'The thinking is if you're going to rent a movie from
YouTube, you're not going to rent from a Blockbuster store or
Netflix,' said Edward Woo, an analyst at Wedbush Morgan
Securities.
Woo said that a deal would likely hurt Netflix more, since
the subscription-based company has a much deeper digital
streaming service.
Woo considered the overall impact to both companies
minimal, adding, 'I think people are overestimating the success
that YouTube will have.'
Janney Montgomery Scott analyst Tony Wible rated Netflix a
'sell' with a $34 price target on Thursday, saying the market
has failed to price in competition from YouTube and rental
kiosks deployed by Blockbuster and Redbox, as well as
competition from a Google Inc movie rental service.
According to a person familiar with the talks, YouTube has
held discussions with Lions Gate Entertainment Corp,
Sony Pictures, a unit of Sony Corp, and Time Warner (NYSE: TWX - news)
Inc's Warner Brothers about online movie rentals.
It would mark the first time the world's most popular video
site would charge users to watch videos.
Woo said Blockbuster's stock is also retreating from a
recent run-up.
Shares of Blockbuster jumped more than 37 percent on
Wednesday after the company cut the size of its letters of
credit for Viacom Inc (NYSE: VNV - news) by about two-thirds, or $50
million, a move that analysts said signals an improving credit
outlook. The company also recently announced the sale of
entertainment retailer Xtra-vision Limited in Ireland.
Traditional movie rental chains like Blockbuster have
struggled to retain customers going online and innovative
services like Netflix and Coinstar Inc's Redbox.
(Reporting by Laura Isensee, editing by Matthew Lewis)
Keywords: NETFLIX/BLOCKBUSTER
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