Netflix Surges on News that Facebook Connection Arrives by Week’s End

Michael Teague  |

On Wednesday, Netflix (NFLX) announced that come the end of the week, users in the United States will be allowed to connect their accounts through Facebook (FB), permitting them to share what they have been watching with their friends on the social networking site. Netflix, for its part, will be adding features to its interface that allow users to see their Facebook friends’ favorite films as well as what they have recently watched.

The news sent Netflix shares up just over 6.5 percent to as high as $195,, while Facebook shares were down 2.35 percent to $27.18.

Michael Pachter, a securities analyst with Wedbush Securities, stipulated that the deal is not so much about Netflix attracting new subscribers as it is getting the word out about their new original programming. “I don’t believe there is much potential to attract new subscribers in the U.S., as most people already know about Netflix, [but] it’s possible that a Facebook post will make you aware for the first time that Netflix has the show, and it makes existing subscribers less likely to churn if they continually discover new content,” he said.

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The company’s stock has known some difficulty since it was trading for just under $300 per share back in July of 2011, but has taken some impressive leaps since January of this year, especially when it announced a deal with Disney (DIS) to stream its content exclusively by 2016. Netflix’s year-to-date performance has almost doubled, with the rate currently at about 97 percent.

This kind of exponential increase is unlikely to be sustained throughout the year, especially considering how competitive the streaming business has become for Netflix, with Amazon (AMZN), Wal-Mart (WMT), and perhaps even Apple (AAPL) having made or planning to make inroads into that market.  Hence the company’s focus on original content, that so far has been somewhat hit-or-miss: the House of Cards series starring Kevin Spacey and directed by David Fincher, of which all 13 episodes were released at once, was tremendously popular and received critical acclaim, while the show Lilyhammer, with its unconventional plot-line, was more or less a flop.

Netflix, unfortunately, does not have the budget of most production companies, and for all its success, House of Cards was well over its budget.  The company is sure to have another hit when it brings back the cult-favorite Arrested Development for one more season, but after that, there will be little margin for error.

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