Why I feel good about Netflix

Im going to throw it out there, I Like Netflix. There I said it. True it had what could be called either a "Rocky" or "Catastrophic" year in 2011 with drops from its highs of 304 in July to 62 in November but it is my belief that these drops have resulted mostly from a mass panic from investors rather than any economic reason for such a sharp drop.

Now this isn't to say that i agree with all the decisions made by Netflix's management in 2011 and indeed the short-lived decision to spin-off its disc service was the wrong decision made at exactly the wrong time. Why would you want to further splinter your customer base by creating a new service at a time when you are trying desperately to hold onto customers after a high profile price rise. The quick U-turn on this looked bad but could have saved the companies core customer base.

So why the good feelings about a company who has made such blunders in the last year and who according to its stock price is almost on deaths door when compared to such a short time ago. Well my good feelings stem from the core of the companies business model, its streaming business. Internet Entertainment has come along way in the last few years, the boom of websites like youtube and the rise of network online players has led a migration of entertainment usage from the TV to computers,tablets and smartphones. Online streaming legal or otherwise has become a huge part of not just the way in which we take in video but also music through services like Spotify, Grooveshark and Love.FM . More and more people are moving from the traditional cable or satelite box and accompanying bills in favor of a more streamlined online existence. And why wouldnt you want to break away from those set top boxes, filled with channels you never watch yet have to pay for regardless, why would you want to be tethered to your TV set when you could choose online material and watch it almost anywhere.

As i have said in my previous post on which trends we can expect to see in 2012 online media will grow ever further and faster, boosted by improving infrastructure and larger content libraries. Netflix will continue to ride the cusp of this wave and if it can keep some momentum i predict it will be back up to its mide 2011 dominance (and stock price) within the next 2 years.

To Watch For: Further intergration with Facebook possibly allowing people to view content via the social media website could lead to a huge boost to customer base in Europe in a similar way to Spotify boosting its US visibility and customer base in the US through similar integration with the social media giant.