Despite plenty of criticism (including from this journalist), there’s no denying that Netflix — the pioneer of the industry as we know it — still is the name all the rest of the players are gunning for. As of the latest look, Netflix has right around 30 million subscribers, and has generated $3.5 billion in revenue over the past four quarters. Problem: It has turned only $146 million of it into a profit, and next year isn’t expected to be much better.
Coinstar (NASDAQ:CSTR) and Verizon (NYSE:VZ) have forged the newest partnership in the streaming industry, combining Redbox’s well-recognized name with Verizon’s technical prowess and large customer base. It remains to be seen where this goes, but with 34,600 kiosks already in place, the venture certainly had plenty of brand recognition.
This relatively new name in the industry has a surprisingly robust catalog, and is based roughly on the Apple model where users only pay for individual items they watch. Were it a better-established brand name, it might actually be a serious threat. Who owns and operates Vudu? Amazingly enough, Walmart (NYSE:WMT), which not only racks up a couple of bucks on each digital movie rental, but also is aiming to encourage those customers to convert their DVDs (which the retailer will gladly sell) into a digital format they can store and access online.
Comcast has thrown consumers something of a curveball with its fairly new Xfinity service. Most of its packages offer a combo of on-demand video titles (with a pretty good-sized catalog) and cable TV and/or Internet and/or phone services, thus justifying the entry price of $29.99 per month and up. It’s actually a pretty clever tactic — rather than bothering to compete head-on with Netflix, the company is leveraging its telco and cable capability to offer something in a way that Netflix can’t.
And the Winner Is …
It might be the biggest, but it’s no longer the best — Netflix has the least to offer investors at this point, as there’s just too much nagging competition that can afford to use a streaming video service as a loss leader to drive sales in other ways; Xfinity, Vudu and Amazon Prime are all examples.
In fact, those three are the names that likely will benefit the most from the continued advent of streaming video. It won’t be because of depth and quality of their digital content, but rather, because of what else those companies can sell to their digital content customers.
Hulu, HBO Go, iTunes, Blockbuster and GoogleTV (and all their backers), on the other hand, continue to struggle, with no clear edge with their digital content business. With a few tweaks here and there, that edge could be found — but those tweaks have yet to be made.
As for Redbox Instant, it’s just too soon to tell if the offering is strong enough to start taking market share away from competitors.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.