Is Netflix, Inc. (NFLX) About to Drive Away Millions of Subscribers?

Alternatives to Netflix?

To be fair, most of what Netflix, Inc. (NASDAQ:NFLX) lost in May was a bunch of old movies; the sort of content many subscribers likely won’t miss. But given what Netflix has said, it might just be the beginning.

In June, the company’s deal with Viacom will expire — that will mean a loss of many MTV and Nickelodeon shows. Netflix has said it is willing to reacquire this content through new deals, but only on an exclusive basis. Likely because Netflix is aiming to differentiate its service from its competitors.

Although Netflix, Inc. (NASDAQ:NFLX) has gained many competitors in recent years, Amazon.com, Inc. (NASDAQ:AMZN) Prime Instant Video is the most formidable. A Prime subscriber must pay up front, but over the full year, the cost of Prime is less than Netflix. In addition, Prime subscribers get access to other Amazon services — free two-day shipping and the Kindle lending library.

And while Netflix may still have more content than Amazon Prime, there is a significant crossover. Amazon Prime, for example, has a similar deal with Viacom.

Letting its content deals lapse may benefit Amazon.com, Inc. (NASDAQ:AMZN) Prime in the short term, as the difference between the size of their content libraries recedes.

Setting up for a repeat?

Netflix shares have rallied rapidly in just the last several months. Since the beginning of last October, shares of Netflix, Inc. (NASDAQ:NFLX) have more than quadrupled.

That rally has largely been predicted on two solid earnings reports — reports that had the company beating earnings expectations while reaching nearly 30 million domestic subscribers.

If Netflix, Inc. (NASDAQ:NFLX)’s willingness to let content deals lapse is enough to provoke a similar exodus of subscribers, shares could be setting themselves up for a repeat of 2011.

The article Is Netflix About to Drive Away Millions of Subscribers? originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

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