I own Netflix! Well, at least a handful of shares. I’ve bought more over the last few weeks.
It’s been easy for commentators to kick Netflix this last month. Necessary but unpopular changes went into effect with (to the average user) little warning. Unnecessary changes (Qwikster) were announced and dropped. This is the usual bag of comments:
I dropped Directv a year ago. I was paying $80 a month to watch John Stewart and a Rugby Match every week. I found that, given the choice between TV and Netflix, Netflix won nine nights out of ten.
What the commentators are missing is the difference between entertainment and “instantaneous” entertainment. Instantaneous as in sports, news, this season’s hit TV show and the latest “blockbuster” movies (delayed for months). This is the same, not so fresh, instantaneousness that film producers are trying to eke a few more dollars out of as movie theaters fall out of favor.
Netflix eschewed this content from the start and left that ground to competitors to scrap over. Coming from the DVD distribution business, they knew in advance that their customers didn’t much care for fresh so much as for quality.
So when commentators speak about Netflix not having a “moat” for the streaming business, they’re really talking about that tiny slice of current content that Hulu and Amazon are fighting for. Netflix’s moat (which I hope they now understand) is the sheer depth of their content when the DVD and streaming are combined.
In the last month I’ve watched obscure anime (Darker than Black, Clannad) and two series (Criminal Minds, Eureka). Next week I’ll have a Jean Cocteau film festival every night. That’s leaving out the documentaries. Sure, maybe I’ll be lured by Hulu or Vudu or whatever. Maybe I’ll check out what they have to offer. Will it match up to the kind of expectations that Netflix has instilled in me? Not a chance.
So, I still own Netflix. I’ll probably buy more.
PS: I wrote this before this evenings earnings announcement. The stock is down to $86 after hours. I’m putting in my order now. All of you Benjamin Graham fans will understand.