by Tom Taulli | January 24, 2013 12:23 pm
TV appears to be in the midst of a major transformation. And it looks like tablets and smartphones are a key reasom.
So far, the leader in this trend is Netflix (NASDAQ:NFLX). According to its fourth-quarter report, the company noted that mobile devices contributed a big part of its growth ramp. Consider that Netflix added 2.05 million subscribers, bringing the total to 27.15 million.
All in all, the company believes that people want to get their TV anywhere and anyplace. It could be on an Apple (NASDAQ:AAPL) iPad, a Microsoft (NASDAQ:MSFT) Xbox, a smart TV, a car player, a refrigerator and so on.
While Netflix certainly has much competition — such as from players like Comcast (NASDAQ:CMCSA) and Amazon (NASDAQ:AMZN) — the company still has the first-mover advantage in the streaming market. This has made it much easier to offer better features, personalization and availability across many platforms. As a result, it’s usually an easy decision for customers try out Netflix.
The company has also been judicious with its content. For example, Netflix has recently cut deals with companies like Disney (NYSE:DIS) and Time Warner (NYSE:TWX).
But again, mobile access is critical for making these investments pay off. In fact, Netflix explained this in its shareholder letter yesterday: “With Netflix, members can enjoy a show anytime, and over time, we can effectively put the right show in front of members based on their viewing habits. Thus we can spend less on marketing while generating higher viewership.”
Traditional TV, on the other hand, requires getting large audiences that show up to watch a program at a particular time. It’s the only way to generate enough advertising revenue.
But Netflix can create large audiences over time. What’s more, content creators aren’t constrained by TV’s 22/44 minute time frames to make room for ads. After all, Netflix has no commercials!
Now, this doesn’t mean investors should jump into the stock right now. Let’s face it, NFLX has already been a huge run. So, it’s probably best to wait to get a better price.
But looking at the next couple years, Netflix is in an enviable position to lead the transformation of TV. And it’s a massive market opportunity, especially as the mobile revolution continues to grow and the company invests heavily in global markets.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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