What You Might Have Missed When Netflix, Inc. (NFLX) Reported Earnings

It’s an extension of what set TiVo Inc. (NASDAQ:TIVO) apart in the early days. Your channel-surfing taught TiVo’s digital recording boxes a lot about your viewing habits, which allowed the box to present a list of recommended content. That guidance is arguably more valuable than the simple ability to record TV shows without worrying about VHS tapes, and is the foundation of TiVo’s strategy even today.

Netflix digs even deeper. The company knows what you’re watching, just like TiVo Inc. (NASDAQ:TIVO), and both systems come with star-based ratings systems. Netflix also combines this information with patterns culled from DVD and streaming customers since the beginning of red mailers. Mass psychology and big data analysis come into play. Netflix doesn’t just know what you might like to see right now, but can also predict the kind of content it should buy or produce for people like you in the future.

This is a massive moat. Amazon.com, Inc. (NASDAQ:AMZN) can’t match it, because the company has nowhere near the wealth of customer data that Netflix sports. HBO sure can’t run in this race until its online HBO Go service gets a decade of operating data under its belt. The same goes for Hulu, no matter which media giant ends up taking control of that service.

TiVo does have a similar data library and aims to exploit it in the next phase of its checkered history. That’s the main reason that I still own that stock: There’s a solid advantage in play, and TiVo-less cable operators will find it hard to match this high-quality feature.

But nobody else can compete with Netflix’s data trove. Not even TiVo. The fact that 75% of viewing hours come from recommendations is evidence that it works. It’s an investable advantage that most people ignore.

But now you know. I own Netflix shares, and the stock is one of my most successful CAPScalls to date. This report did nothing to damage my long-term thesis for owning Netflix shares.

The article 3 Takeaways You Might Have Missed When Netflix Reported Earnings originally appeared on Fool.com and is written by Anders Bylund.

Fool contributor Anders Bylund owns shares of TiVo and Netflix, but he holds no other position in any company mentioned. Check out Anders’ bio and holdings or follow him on Twitter and Google+. The Motley Fool owns shares of Amazon.com and Netflix. Motley Fool newsletter services have recommended buying shares of Amazon.com and Netflix. Motley Fool newsletter services have recommended creating a bear put ladder position in Netflix.

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