Netflix, Inc. (NASDAQ:NFLX)

pab24 (< 20) Submitted: 6/6/2007 11:23:23 PM : Start Price: $22.80 NFLX Score: +215.83

Netflix is in a prime position to capture the video rental market for several reasons. First off it offers a 'niche' service in that it doesnt have to worry about operating costs of brick and mortar stores which allows it to hold on to and invest in a wider more varried selection of DVDs, HD-DVDs and Blu-Ray discs. other companies such as Blockbuster are unable to match the quantity over breadth of selection. Now Bluckbuster has something in that it can maintain a strong selection of mainstream new releases but that is only a small percentage of the overall rental market which shows in the ammount of business thier stores continues to lose. As more people become aware of the breadth of selection available on Netflix and gain more comfort with the online rental system they will switch. Second, streaming movies is not the future for mainstream movie rentals, at least not in the near future. More people are buying large screen, Hi-Def TVs than ever before and movies streamed over the internet don't match the quality of a standard DVD let alone either of the Hi-Def formats available. Plus with current braodband penatration the way it is, the average person with a cable modem still has to wait about an hour to get that movie to start playing, and then hopefuly the system is bug free as it pops up on the TV. It's just not ideal, yet, maybe in the future, 10+ years i think.
Last, on the recent speculative side, if Amazon does aquire Netflix you instantly have a solid foundation for innovation in the industry in the means of a rent-to-own stratagy, or you like it you keep it. Amazon would be able to offer individuals to purchase movies they've rented and be in excellent position through it's distribution and retail leverage to keep thier inventory stocked and retail those movies below prevailing market prices from any brick and mortar store. As packaging becomes more obiquitous (see how many twenty year olds through away thier video game cases as evedinced by the resale shelves at GameStop, etc... the same mentality applies to DVD casings) Buying a DVD in a plastic sleeve over pretty packaging is a non-issue and the convenience of just clicking a few buttons on a website to confirm holding on to your new favorite title would be a snap. I bet this feature will be available soon after any buyout. By itself Netflix's prospects are full of potential, as a commodity of the ever rising Amazon behemoth it's domonince over the industry will only be accelerated.