$55.86
-0.53 (-0.94%)
Netflix, Inc. (NFLX)
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The Company is a online movie rental subscriber which provides more than 6,300,000 subscribers access to a comprehensive library of more than 70,000 movie, television and other filmed entertainment titles on DVD.
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Netflix is the market leader in a market they basically invented. They have created three barriers to entry. First, they have a distribution system that will be expensive to match. Second, they have created a distinct brand identity that defines the market space. Third, their web site technology is difficult to match. Their only significant competition, Blockbuster, ahs been forced to play by their rules. BB is saddled with real-estate and employee costs. Unless BB completely changes to the Netflix model or finds a way to make their stores a LOT more attractive, NFLS will continue to dominate this space.
As for broadband moves and video-on-demand, I doubt they will east Netflix's lunch for technological and legal reasons. Sony, for example, will never allow Time-Warner Cable to download their library thanks to studio competition. Plus, since the studios want to make profit on each viewing of the movie, they will build in tech hurdles to multiple viewings. Netflix has no such hurdles -- you can watch the movie as much as you want, as long as you want, and the studio doesn't know or care.
That said, broadband delivery could eventually be a problem, but not in the 5-year timeframe. And even if it does become feasible, I believe Netflix will pioneer this space too.
I agree with a lot of what you are saying, however when it comes to markets that I myself as a buyer participate in I think that this presents an opportunity for me to critically examine the product from a few extra angles.
1. Do you use Netflix?
2. If so, why is it better/more convenient? If not, why not?
3. Do people you know use Netflix?
4. What makes it better/more convenient for them?
When I look at the numbers, the technology, and the ideas behind this company they all point to buy. However when I analyze this stock from a consumer's perspective I have to say I'm far less than impressed. Other things to consider which may seem small in the big picture but significant from the perspective of the individual consumer are issues like the 24 hour wait between ordering a new movie and actually getting the movie. That may not seem like a lot, but as a consumer movie rentals for me are often spur-of-the-moment decisions. Also I often find myself movie hunting with a group of friends, and it's hard enough to find a movie that we all agree on in a Blockbuster store, much less being restricted to the few movies I happen to have laying around from Netflix.
Basically what I am saying here is that Netflix may be a great company with revolutionary ideas in theory, but when you look at the numbers a very small percentage of the public actually uses this service. Some analysts see this as a sign for potential growth; I see it as a rejection, by consumers, of a service we are not interested in.