Netflix Deeply Penetrates The $500 Billion TV Market

Oct.14.11 | About: Netflix, Inc. (NFLX)

Eric Schmidt (GOOGLE CEO 2001-2011) recently warned U.K. broadcasters about how the nature of the television industry is changing, and told them they need to get on board or get left behind.” Specifically stating, “You ignore the Internet at your peril. The Internet is fundamental to the future of television for one simple reason: because it’s what people want. “ Of course, his idea of doing this is to join forces with Google (NASDAQ:GOOG), but self interests aside — this is an extremely salient point.

Trefis recently highlighted the extent and players in the TV Market Battlefield. In the past 30 days Netflix has significantly penetrated the Internet TV Market by securing the following significant alliances and agreements:

October 13: Multi-year exclusive licensing agreement with CBS (NYSE:CBS), (NYSE:CBS.A) and Time Warner (NYSE:TWX) for streaming episodes of The CWs shows.

October 7: Multi-year licensing agreement with AMC Networks (NASDAQ:AMCX) who owns and operates several popular and award-winning cable television brands. Exclusive license for "The Walking Dead," non-exclusive rights to other scripted and unscripted shows.

September 26: Multi-year exclusive subscription television service with DreamWorks Animation (NASDAQ:DWA) for first-run feature films and select television specials.

September 22: Facebook announces partnering with Netflix and a new app allowing Facebook users to stream video from Netflix.

September 21: Renew and Expand offering of Discovery Communications (NASDAQ:DISCA), (NASDAQ:DISCB) series and specials, the world’s #1 nonfiction media company (1.5 billion cumulative subscribers in 210 countries and territories).

This surge forward in TV content by Netflix (over 25,000 titles) is significant since the new TV battle lines are just beginning to be revealed. Especially since no other players like Dish (NASDAQ:DISH) (3,000 titles for streaming to TVs and 4,000 titles for PCs) have a significant competitive title offering position for viewing on TV [Amazon (NASDAQ:AMZN) offering is PC associated]; or a significant competitive number of customers given that Hulu just reached a subscriber count of 1 million compared to Netflix's 24 million subscribers.

At this point Netflix is clearly dominating in the battle to provide easy (game console) access for the average "5 hours of TV a day" customer. A guy can just sit on his couch and easily select from a broad option of favorite shows. The ease of access where and when the customer wants access (couch and TV -- not PC) is a crucial factor in the successful market position and early dominance of Netflix in penetrating this $500 billion market.

Disclosure: I am long NFLX, GOOG.