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NetFlix aka instant streaming is here to stay.

|Includes:Netflix, Inc. (NFLX)

I started the morning very pessimistic on netflix.After reading about a dozen articles and a hundred blogs and a few market reports about netflix I heard the guy on my left shoulder scream, don't do it. you are not the wiser of them all. All the reports and articles seemed to speak to the investors who burnt their hands on the way down. But the 80$ price got me thinking. I have never had netflix shares before. What now ? where does the stock go from here ?. I decided to ignore the pros and find my own answers .I logged into my netflix account and started browsing. Within a few minutes the original purpose was forgotten and I was engrossed in my favorite the office episode. 10 minutes later I was back in the real world. I still had a decision to make.

I'm an avid TV and movie watcher adding my share to the clogged bandwiths of service providers. I have had my share of blockbuster, redbox and netflix accounts and sometimes simultaneously. I pulled my credit card statements for the last 12 months and started looking for all charges related to content. Blockbuster came on top followed by redbox and netflix really a distant third. I did not remember stepping into a blockbuster store that many times, so I tried to account for the movies I rented at the store. Redbox was easier, I was able to get all my rentals from the email notfications redbox sends out.

Two things stood out. I had paid a ton of late fees on both accounts. An average blockbuster movie rental was 8$ a movie and redbox was the worst at almost 10$ a movie. A price I paid for avoiding the physical effort to return the movies on time. Now I'm sure there are more responsible renters who return their movies on the dot. But I'm sure everyone pays their share of late fees.  There was also a pattern on how I was renting movies at both redbox and blockbuster. I had never rented singles. There was always the popular movie which I wanted watch and an additional not so popular movie or an older movie. And most of the store visits were predictably on the weekends. I realized I was renting more than one at a time to play it safe. What if the most popular movie I wanted to see "sucked". I remember enjoying the companion movie "breakdown" more than "Knight and Day" which made me go to the store.

From my statements I could tell that I was spending lesser and lesser on redbox with no activity on the last 3 months although I was heavy on red box once. I did not have to rack my brains as to why. When I saw the first redbox, I was thrilled. I remember telling my wife these guys are going to make it big. To me redbox was an innovation right at the door step of every grocer. You did not have to do a "movie run" you just did a "grocery run". I gave up on redbox this July. Redbox at 9 pm is a queue of 9 people anxiously clutching their dvds to make the cut off. All of them behind the 3 that simply cannot make up their minds on what to rent. I have made faster stock picks. For red box to work for me I need two changes. Multiple slots for returning movies without having to use a touch screen. A limit on time you can spend browsing for movies without checking out.

Now coming back to netflix, I realized I spent a lot more time with netflix through the week. Both me and my wife had the netflix app on iphones. We were watching very different content and according to my credit card statements I was paying next to nothing for the service. I realized if money became a squeeze, the squeeze will probably be on media that demands physical delivery. We are just addicted to streaming content. But may be we don't know it yet. If I cancelled my netflix account, I can assure I will have withdrawal symptoms within the month. Sure there are alternatives but none have the same user experience and multiple ways of accessing content. 

I realized netflix or not content  streaming is where the world will be moving into. All the indicators are visible. Home internet speeds have hit the 10 mbps mark and ever increasing. Home viewing experience has greatly increased with the led tvs, surround sound systems, HD viewing and what nots. Music is going to the cloud along with all your data. It is only natural for movies to be on the could too. All this massive data centers and technology that handles terra bytes of data should mature, build scale and start to lower the cost of operations at some point. Given netflix made a mistake. A mistake by setting unreasonable expectations in the minds of a customer. That they could get all there was for the price of a 3 piece combo in Ell pollo loco. Well that was unsustainable. But it did help expand netflix's subscriber base enough to get noticed.

In the end I think content creators are addicted to netflix's subscriber base and subscribers are addicted to netflix convenience and content. Netflix cannot be ignored by the customers or the content creators. The platform is not being questioned here. streaming is the future and is sustainable. Netflix really is a reseller. Top reseller of online content with an eniable subscriber base.

I still have the britney spears cd I got for 15.99 in 2001. I remember loading  up on cds everytime we did a road trip. I now blast my playlists from rhapsody. Home, office, road trip does nto matter. Welcome to the cloud. I remember music labels did not embrace digitally distributed music instantly. It changed their model. They could not make people buy albums with 1 hit track and a 5 that sucked. But the industry has now adjusted to it and thrives.  I'm sure there is going to be a period of adjustment for content creators and consumers. Netflix is going to look uncertain till the model stabilizes. However with demand, price being the issue will always get worked out in the end. I logged in to my investment account and bought myself shares of netflix. I'm in it for the long haul.

Disclosure: I am long NFLX.

Stocks: NFLX