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TheStreet Open House

Can Netflix and Disney Make Amazon Insecure?

Stocks in this article: NFLX AMZN DIS TWX CSTR

NEW YORK ( TheStreet) -- I've spent a good portion of this year beating up on movie streaming giant Netflix (NFLX - Get Report). It seems too often the company has not been able to get out of its own way.

An ill-timed price hike was one example of how Netflix was forced to bandage what have been chronic self-inflicted wounds. However, it appears those days are over.

With Netflix having just announced a content licensing deal with Walt Disney (DIS - Get Report), I'm now beginning to wonder if Netflix turned the corner and placed Amazon.com (AMZN - Get Report) in an unfamiliar position -- feeling a bit insecure.

Although Netflix's deal does not adversely impact upon Amazon's overall growth potential, I wonder if the lure of Disney will be enough to convince investors to be patient until the company can generate meaningful returns on its capital. Although Netflix has been growing revenue, profits have lagged. That wasn't the worst of it.

Netflix's situation looked even more grim three months ago when Amazon announced its content deal with premium TV joint venture Epix. This was Amazon's attempt to steal would-be Netflix subscribers. The deal allowed Epix to offer content to Amazon's Prime instant Video streaming service, including several popular hit movie titles such as The Hunger Games, Thor, The Avengers, Iron Man 2 and many more.

What the deal also meant was Netflix's partnership with Epix was no longer exclusive since Netflix allowed the agreement to lapse, which left the door open for Amazon. At the time, I asked what Netflix was thinking. How could a company already dealing with competitive pressures from the likes of Time Warner (TWX) and Coinstar (CSTR) (Redbox) allow such an advantage to slip away?

It seems the Disney deal answered this question. But it's going to take some time.

Although Disney will bring several advantages by allowing Netflix subscribers to stream not only Disney movies but also those from subsidiaries including Pixar and Marvel, this won't take effect until 2016. In the meantime, Netflix will have to execute perfectly and hope that the world's fiscal concerns improve.

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