Netflix to Launch DreamWorks Dragons - Analyst Blog

Reportedly, video-streaming giant Netflix NFLX will add Dreamworks Dragons, a cartoon based on the How to Train your Dragons film series to its growing list of children's shows in 2015.

The show will be telecast as part of the multiyear deal between DreamWorks Animation and Netflix whereby the former had agreed to bring about 300 hours worth of original programming to the latter.

Of late, video streaming companies have recognized that kids make up a significant chunk of TV show and film viewers. To capitalize on this, Netflix had launched its exclusive Internet video streaming service for kids, Just For Kidsway back in 2011.

Netflix went on to sign other partnership agreements including one with DreamWorks Animation SKG, Inc. DWA in Feb 2013 for a dozen TV series to remain competitive in the video-on-demand market.

Dreamworks Dragons is the second show that Dreamworks is making for Netflix. Actors lending their voices to the series include Jay Baruchel, America Ferrera and Christopher Mintz-Plasse. Earlier in 2013, Netflix had premiered Turbo Fast, which was a spinoff from the animation studio's movie Turbo.

Dreamworks Dragons was launched in 2012 on Cartoon Network where it was a huge success, with 2 million viewers per episode on average. The show is expected to serve as a bridge between the 2010 feature How to Train your Dragon and its sequel scheduled for release on Jun 13, 2014.

Reportedly, Netflix will soon stream animated movies owned by Sony Pictures including Cloudy with a Chance of Meatballs 2 and The Smurfs 2. The move will help Netflix to strengthen its footprint in the kids section amid growing competition from the likes of Amazon.com and Hulu.

Over the last one year, Netflix has entered into 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 and The Weinstein Company TWC, apart from Walt Disney DIS and Dreamworks.

These deals have helped Netflix to not only grow its content portfolio, but also to move into new segments such as comedy, political thrillers, autobiographies and horror.

This has been the primary reason behind its success in the recent times. Netflix added 11.89 million paid streaming subscribers over the last 12 months. Its total streaming subscriber base increased 12.04 million year over year to 48.36 million, primarily driven by its expanding content portfolio that includes original and popular productions such as Arrested Development and House of Cards.  

International expansion is another key growth driver for Netflix. The company recently announced its plans to enter Germany, Austria, Switzerland, France, Belgium and Luxembourg by the end of 2014.

However, starting operations in a new country demands huge investments and increases marketing and general and administrative expenses considerably. Netflix, therefore, expects the international segment to continue to report a loss for the rest of 2014.

Nevertheless, Netflix's recent price increases (for both domestic and international new users) will help the company to offset these higher expenses. Moreover, the company's ever-expanding content portfolio and focus on improving customer engagement will continue to boost the subscriber base.

Currently, Netflix has a Zacks Rank # 3 (Hold).