One of the big announcements from Microsoft during the company's E3 conference was its new partnership with Netflix to bring streaming movies from the service to Xbox Live. And while Microsoft sees the deal as a way to enhance the value of their videos service, the real winner is probably Netflix.
According to Wedbush Morgan Securities analyst Michael Pachter, the "low hanging fruit" of 10.5 million Xbox 360 owners in the U.S. could be a boon for Netflix as it looks to add more revenue though digital services. "As Microsoft rolls out deployment of Netflix on Xbox Live, we expect to see as many as 1 million Xbox Live Gold members become Netflix customers," he said. "We think that this could happen by the end of 2009."
Between Xbox streaming and a new premium pricing plan for Blu-ray usage, Pachter believes Netflix will continue to improve its bottom line. "Twenty cents here, twenty cents there, and pretty soon we are talking about real money. We expect to see contribution from these initiatives gradually, with the greatest contribution likely coming from new Xbox Live subscribers signing up as Netflix customers," he said. "...we are confident that Netflix is heading in the right direction, and are confident that it can deliver earnings upside for the next six quarters."
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