By Elliot Turner
It’s only natural for people to want to compare Netflix (NFLX) with Blockbuster (BLOKA.PK), especially with Blockbuster having filed for bankruptcy yesterday while Netflix launched to new all-time highs. Many generations associate Blockbuster with movie-watching and Netflix as a young upstart company certainly launched as a head-on attack against Blockbuster. While in the past, the competitive comparison was very relevant in gauging Netflix as a company, that contrast no longer applies in the present.
Although Netflix continues to grow its DVD-by-mail rental base, the true growth and real catalyst behind the stock’s ascent is its positioning in the ever-important streaming market. It’s almost amusing how little people in the finance arena understand about the Netflix model. Just two months ago I had to step up and defend Netflix from attacks that they are “the next Crocs (CROX)” and every day, I continue to see someone complain that Netflix’ recent move is reminiscent of 1999. Keep in mind that this is a real company, with real revenues, positive earnings and what in 1999 would be an insanely modest P/E of 65. Heck if this were 1999, forget about $160 a share, Netflix would be at $1,000.
Back to the why the Blockbuster comparison is irrelevant. The future of content and media distribution lies in the virtual world of the Internet. It’s only a matter of time before DVDs go the way of the VHS. As much as Blockbuster may try to reorganize its balance sheet, it lacks any sort of digital footing and for that reason, it’s presence is a moot point in the Netflix picture today. Netflix’ real competition comes from the likes of Hulu, Apple (AAPL), Google (GOOG) and Amazon (AMZN)–web-based companies with built in media distribution infrastructure.
If you want to know just how strong
