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There are days when I wonder how I've survived this long. Saturday -- the day I forgot how to use a DVD player -- was one of those days.
Go ahead and call me a moron. I sure felt like one. But after shrugging off my initial embarrassment, I realized something important. In my decade of investing in tech, my best ideas have always come from noticing subtle shifts in behavior.
My DVD player ignorance, born of an increasing addiction to streaming video, fit patterns I'd seen before:
- When I noticed my increasing intolerance for slow Internet access, I invested in Akamai (Nasdaq: AKAM ) .
- When I noticed that Web-accessible services were not only simpler for me to use but also better at keeping me productive, I invested in Google (Nasdaq: GOOG ) .
- When I noticed that my Mac could run Windows as reliably as my PC, I bought shares of Apple (Nasdaq: AAPL ) .
Each stock has been a winner for me. Only my Google stake has lagged the market. If following behavioral shifts had served me so well in the past, why, I wondered, didn't I have a real-money position in Netflix (Nasdaq: NFLX ) ?
Virtually every part of the DVD rental process annoyed me. First, Redbox's iPhone app wouldn't let me reserve the film I was looking for. Then, when I arrived at my local box, the film I wanted to rent was nowhere to be found. So I went to another kiosk 200 yards away, in front of the grocery store. There I was able to get the flick I wanted.
But getting the movie was only the beginning of my frustrations. I'd forgotten how to switch over to the proper TV input for the DVD player. A few minutes of thumb wrestling transported us to the DVD "channel" only to find a seemingly endless spool of previews and ads we weren't allowed to skip past.
By the time the movie was due to begin, both my wife and I wondered why I hadn't just clicked on pay-per-view. Streaming rocks. Renting? Not so much. And that's putting it politely.
Yet neither is Comcast (Nasdaq: CMCSA ) impressive when it comes to delivering movies and TV shows on demand. We pay for the premium Xfinity service, and while it's orders of magnitude better than what DISH Network (Nasdaq: DISH ) provided to us when we were still customers, the interface is frequently obtuse and selection no more than passable.
Which brings us back to Netflix, the only company in the movie delivery business that's built entirely around entertaining me on my terms. Only iTunes gets close, with related services such as Amazon.com's (Nasdaq: AMZN ) Instant Video meriting an honorable mention for also trying to understand my tastes.
But it's Netflix more than any of the others that takes the necessary time to study my interests and give me what I want, when I want it, without ads or interruptions. In many ways, I think of it as the business Warren Buffett would own were he ever to try tech.
Netflix offers aspirin (i.e., simple, fairly priced streaming) for a headache I'd rather not suffer (i.e., driving to get a DVD and struggling to fiddle with a dated player). If only I'd figured this out years ago. I'd be a much richer investor.
The good news? History says the tectonic shifts caused by subtle changes in behavior tend to last far longer than we might otherwise believe. Look at Amazon.com. The e-tailer has been public for close to 14 years now, and it's nowhere close to exhausting the e-commerce opportunity it was built to take advantage of. I believe Netflix enjoys a similar runway, and I plan to be aboard when this flight taxis for its next take-off.
Let this article be your notice. I'll be opening a position in Netflix as soon as disclosure rules allow. Care to join me? Think I'm nuts? Please do me the favor of weighing in on DVDs versus streaming, the future of on-demand media, and Netflix's opportunity using the comments box below.
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