May 16, 2011, 6:39 PM — Shares of Netflix (NASDAQ: NFLX) fell nearly 4 percent Monday after the online streaming and DVD rental company announced a multi-year deal with Miramax Films to allow U.S. Netflix subscribers to instantly view hundreds of movies from the Miramax library.
Netflix finished trading down 9.43, or 3.8 percent, to 237.09. The company's stock has resisted constant downward pressure over the past year due to Netflix's increasingly high revenue multiple and concerns about it ability to compete once larger companies begin streaming popular videos from major media players.
Despite this, just three weeks ago Monday Netflix shares hit an all-time of 254.98.
Netflix has attempted to allay fears about its ability to compete by negotiating agreements that would offer subscribers a wider selection of movies.
The company said that Netflix subscribers in the U.S. will be able to watch some Miramax movies starting next month. The movies can be viewed on subscribers' TVs, computers, tablets and smartphones.
Among the Miramax properties available on Netflix will be "Pulp Fiction," (!) "The English Patient," "Clerks" and "Good Will Hunting."
What investors may have been reacting to Monday is the prospect of Netflix's margins falling as it spends more money on video content. However, Netflix CEO Reed Hastings has said the company will maintain an operating profit margin of at least 14 percent. We'll see.
Still, the sea change among media companies toward Netflix over the past few months has been striking. Back in December, some video content providers were complaining that Netflix was undercutting their businesses and posed a threat to their revenue streams.
Now listen to Miramax CEO Mike Lang:
"This agreement is an important first step in our digital strategy. Netflix has always been a trailblazer, with a tremendous track record of innovation and quality customer service. We're thrilled to now be in business with them as we build and revitalize the proud Miramax brand."