Netflix, Inc. (NFLX) Benefits From an Independent Hulu

Page 1 of 2

Netflix, Inc.The owners of Hulu have decided to keep the online streaming service. In fact, they won’t just keep it as is — they’re planning to invest some $750 million into the service.

Although Netflix, Inc. (NASDAQ:NFLX) is somewhat of a competitor when it comes to online streaming, the company actually benefits from Hulu’s independence.

Cutting the cord

There’s growing evidence that cord cutting is finally starting to emerge as a potent trend. In the US there’s a group of households — Nielsen calls them Zero TV households — that don’t subscribe to cable, or even watch the free, over-the-air networks. Instead, they stick to Internet alternatives for their entertainment needs.

This group of people is still small (some 5 million households) but growing (up from 3 million in 2007). This trend is most prevalent among young adults.

And it isn’t limited to the US:  In Canada, 16% of households now stream all their TV-related content online.

The rise of Internet networks

What’s fueling this trend? A weak economy probably isn’t helping — cable packages often cost $100 per month or more, and with unemployment remaining high (particularly among young adults) that’s another utility bill many households can no longer afford.

But the rise of Internet alternatives cannot be ignored. For $8 per month, Netflix provides thousands of hours of content. Sure, it might not be as high quality as a robust cable bundle, but $8 is far more affordable than $100.

And it isn’t just Netflix, Inc. (NASDAQ:NFLX). There’s the aforementioned Hulu, Amazon.com, Inc. (NASDAQ:AMZN)’s Prime Instant Video, RedBox Instant, and other alternatives.

Netflix needs a strong online content system

In the past, these other services were seen as a threat to Netflix. If you have Amazon.com, Inc. (NASDAQ:AMZN) Prime, for example, do you really need Netflix, Inc. (NASDAQ:NFLX)? But Netflix has been able to rebuke this challenge — in fact, it has arguably turned its rivals into allies.

As I’ve written previously, Netflix, Inc. (NASDAQ:NFLX) has been slowly changing its business model in recent months — from a cornucopia of broadcasters’ recycled content, to exclusive deals and original shows.

Netflix has signed deals with The Walt Disney Company (NYSE:DIS) and Fox, while paying to develop original shows like House of Cards and Orange is the New Black. Amazon.com, Inc. (NASDAQ:AMZN) has done the same. The online retailer is working to create five new, original series and has acquired exclusive rights to Viacom programming.

And while Netflix and Amazon may be investing in original content to compete with each other, in reality, they’re beginning to create a more powerful alternative to paid-TV providers.

Even if one pays for both Amazon Prime and Netflix, Inc. (NASDAQ:NFLX), that’s only $175 for a full year — a year’s worth of cable could run over five times that amount.

As for how Amazon Prime Instant Video benefits Amazon? Clearly, unlike Netflix, Amazon’s business is far more complex than just offering online video. Still, if Amazon can scoop up some cord cutters, it could gain some retail customers in the process.

Along with video programming, Amazon Prime includes free two-day shipping. Customers who buy Prime for the video might be more likely to buy some physical goods from Amazon as well.

An independent Hulu could bolster that ecosystem

In an interview with CNBC, Netflix CEO Reed Hastings said he feared an independent Hulu, more-so than an acquired company. Hastings claimed an independent company would be hungrier, and a stronger competitor.

Perhaps. Or perhaps Hastings realizes that keeping Hulu as-is benefits his company as a paid-TV alternative. As it stands right now, Netflix and Hulu have a limited overlap (Netflix, Inc. (NASDAQ:NFLX) has a deep film catalog, Hulu is all TV shows).

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!