Wednesday, December 01, 2010

Netflix's Growing Effect On Video Consumption

CNBC's David Faber presented a nice little report on Netflix yesterday morning. In it, he provided some details related to the company's service and its effects on various internet-related phenomena.

For example, HBO, according to Faber, has recently lost more than one million subscribers to Netflix's instant video content viewing. With so many titles available to stream to computers and/or download to DVRs, HBO's value as a separate paid service is dimming.

Netflix is reputed to be responsible for as much as 25% of web traffic during prime hours, as vast amounts of video content is viewed via streaming.

I can't recall the datum, but Faber mentioned the mix of online vs. mailed video content currently being consumed on Netflix, and it's heavily tilted toward the former.

Faber noted all of the above as distinct from the firm's impressive stock price performance.

The nearby price chart for Netflix and the S&P500 Index confirms this. It puts the S&P to shame and has easily transitioned to its new, more heavily-online distribution model while its total returns have remained attractive. Meanwhile, Blockbuster struggles with its legacy stores under Chapter 11 protection.

Faber mentioned that those who have dared to short the stock have paid dearly for their mistake.

I'm guessing that, if Netflix were part of the S&P500, It would have made appearances in my equity portfolios by now.

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