Bryan Kautzman

Is Netflix the Next Apple?

I have to imagine that the laggy streaming content you are experiencing is a result of a sub-par internet service provider. Of course, such evidence is anecdotal at best, so I can counter it quite easily by saying I watch at least a half dozen movies/shows per week via Netflix's streaming module. I've yet to see it lag once.

The evolution of the internet may stagnate due to the stubborn nature of the broadband providers unwilling to upgrade their networks to allow for continued progress in the industry. That is unfortunate.

On Jan 20 04:03 AM waf76 wrote:

> Right now I have an Xbox 360 and a Netflix account but the streaming
> content is laggy and won't play correctly. As a result I'm stuck
> with using the postal service to get my dvds. I live in Long Island
> so its not like I live in the middle of the woods. I know many others
> that have experienced the same issue. Bandwidth will be problem for
> years to come. With that being said Netflix's business model has
> proven to be very effective and profitable. If and when bandwidth
> is expanded the real winners will be the cable companies and verizon
> who offer the bundle packages (i.e. cable, internet, phone)
>

Is Netflix the Next Apple?

One thing that has been mentioned here, and is a huge deal, is the fact that the cable companies are the ones who primarily control the bandwidth. This is an important factor especially in this era of bandwidth caps. One must note that these bandwidth caps could possibly even be an effort by broadband companies to protect their VOD products against Netflix. There is a good chance that this entire scenario will be challenged in court at some point in the future.

However, many of the objections against Netflix can be refuted in at least an acceptable manner. The reason why I like Netflix better than, say, Apple, Amazon, or even the cable companies at this point is simply because of the structure of Netflix's business model. I don't want to pay for movies on a one-at-a-time basis. The traditional VOD service, at $4 to $5 per flick, is a ripoff compared to Netflix's service. If I watch 4 movies per month, I'm getting my money's worth. Furthermore, I don't want to own movies. With the exception of perhaps one out of a hundred titles, all of the movies I watch are watched only once. This is the common market sentiment, and it is the reason why Apple and Amazon will have to change their market plans in order to compete. Finally, at this point, it's all about market share. Netflix has a huge head start, and in my eyes, their product is still the best one on the market. That may change in the future, but until it does, I like their chances.

Is Netflix the Next Apple?

For what it's worth, the editors at seekingalpha can be noted as being responsible for that one.


On Jan 19 08:41 PM KevinH wrote:

> I won't touch your EBAY comments with a 10 foot pole (their margins
> will not keep them in business with their current business trajectory).
> Too much has been said on this topic elsewhere.
>
> But come on man, if you want to be taken seriousely don't misspell
> names of common technologies like "Blue Ray". FOMCL. (hint: Blu-ray).

Is Netflix the Next Apple?

You make an outstanding point, one that I completely overlooked. The television stalwarts will have their advantage because they also sell broadband, but Apple will have an advantage because most of their subscribers are already broadband users. Plus, Apple will have an additional advantage in that they have been one of the most innovative companies of the last ten years. The possibility of them getting into the foray of using a business model like the one that Netflix offers completely escaped me at the time of the writing of this article.

However, the biggest advantage that Netflix has, along with it's track record in innovation, is its current market share. And you're right, the only thing holding Netflix back is people's access to broadband internet connections. However, this may be yet another Obama infrastructure play, albeit indirectly. I envision a future where the internet surpasses television as the preferred mode of entertainment for Americans, and the ability to watch streaming episodes of one's favorite television shows is only the beginning.

One must also not forget about the potential of google in this market through a venue such as youtube.

Sure, the waters are murky at the moment, but with Netflix's current market share combined with their innovative edge, I do believe that their stock in this bear market has nothing but positive potential. In the long term, they could very well end up being an acquisition target.

Thank you for your response.