Michael Pachter: Xbox360 Next for Netflix

June 1st, 2008, 14:21 Posted By: wraggster

Following a Netflix analyst event in San Francisco, Wedbush Morgan Securities' Michael Pachter has reiterated his belief that the popular rental company will partner with Microsoft to offer a new streaming service over Xbox Live.

"The company is investing heavily in building its online streaming capability, to the point where it is a market leader, and a desirable partner for consumer electronics companies that hope to participate in digital media convergence in the near term. As we have speculated in the past, we believe that one of Netflix's partners is Microsoft. We arrive at this conclusion based upon Netflix management repeatedly mentioning 'Internet enabled video game consoles.' While there are three such consoles, only one (Microsoft's Xbox 360) has a sufficiently large installed base to make sense from a streaming partnership with Netflix," Pachter stated in his latest research note.

"It strikes me that the right business model for Microsoft and Netflix is that they both participate for free, and I think the idea is that Netflix has 8 million subs in the U.S. and Microsoft has probably pretty close to that many Xbox Live members in the U.S., and there's probably not 100 percent overlap - my guess is there's a couple million of overlap, but there's 5-6 million Xbox Live subscribers that Netflix would love to have join Netflix service and there's probably 5-6 million Netflix subscribers that Microsoft would love to sell an Xbox 360 to," Pachter told us.

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