Netflix, Blockbuster Shares Drop from YouTube Deal

9/4/2009
Tom Helberg
Major film rental companies shares dropped because of a pending rental deal between YouTube and movie studios.

Shares of movie rental companies Netflix Inc (NFLX.O) and Blockbuster Inc (BBI.N) fell Thursday, burdened by the news that Google's YouTube streaming video service is in talks with major film studios about renting movies.

Reuters reports that Netflix shares dropped about 4 percent to $40.10 and Blockbuster shares fell about 10 percent to $1.08.

"The thinking is if you're going to rent a movie from YouTube, you're not going to rent from a Blockbuster store or Netflix," Wedbush Morgan Securities analyst Edward Woo said.

Woo said that the YouTube deal would most likely hurt Netflix more, as the company is more closely tied to online streaming.

"I think people are overestimating the success that YouTube will have," Woo said.

Google hopes that the move to rent streaming films would make YouTube turn a profit, since the website has long been in the red.

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