Netflix Goes Beyond HD

4K: The tech industry's chicken-and-egg problem.

Jan 12, 2014 at 4:30PM

The Fool heads out to Vegas to check out the 2014 International Consumer Electronics Show. With more than 3,200 exhibitors, including 88% of the top retailers in consumer electronics, the CES is the place to be to see what's coming up in tech.

Which comes first, ultra-high definition content, or devices that can play it? Content providers such as Netflix (NASDAQ:NFLX) and Amazon.com (NASDAQ:AMZN) are teaming up with TV manufacturers to tackle the chicken-and-egg problem of 4K.

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A full transcript follows the video.

Austin Smith: Hey, Fools. Austin Smith here on the floor of the CES with Eric Bleeker. Eric, I want to talk about 4K and the announcement that Netflix just made, that they're going to start streaming content in 4K. First of all, what is 4K, and why is this important for investors?

Eric Bleeker: Yeah, 4K is otherwise known as ultra-high definition. We started seeing a lot of buzz about it last year. It hasn't had a lot of pick-up, in part because there's not a lot of content for consumers that's been filmed in 4K.

Netflix, among other companies, is trying to change this. They just announced a partnership with four TV manufacturers, that they're going to be building in support for 4K streaming. Now, they're not alone; also Amazon announced their own partnerships.

It's important to get these TVs out, because House of Cards -- right here you can see it in the background, a very popular show -- they just released a 4K trailer. There are no TVs on the market that you can watch this trailer in 4K, so it's kind of a chicken-and-egg proposition. You need to get the content out, but you can't sell the hardware until you've created the content.

Smith: Definitely a bit of a chicken-and-egg problem in this industry, as we're seeing, but very fast movers here; Netflix and Amazon, a bit of a monkey see, monkey do. What things should investors be looking at, to know that this technology is getting serious traction?

Bleeker: One of the areas that you need to look at is, what could user-generated content actually do to help this? A great point was brought up in a previous panel that we watched by Qualcomm's (NASDAQ:QCOM) CEO that, effectively, for the first time ever, very few professionals are actually filming in 4K, but a lot of people with smartphones can take advantage of it. The amateur photographer can do it.

Depending on what kinds of content we're creating, users might adopt, but realistically we need to look down at price. If 4K is too expensive, users have shown in recent years they're not as concerned about incremental spec upgrades. We saw last year, the iPad Mini -- as in non-Retina display -- come out to huge sales, even though there were Retina displays on the market for even cheaper amounts.

People are looking more for user friendliness, they're looking for "good enough" solutions, and if 4K stays too expensive and there's not content, consumers just aren't going to buy into it.

Smith: All right, Fools, there you have it. Amazon, Netflix, 4K, Apple -- definitely a hot corner of the tech space right now, and something investors should be keeping an eye on. Make sure you tune in to Fool.com for more coverage of the Consumer Electronics Show. Thanks, and Fool on! 

Eric Bleeker, CFA, has no position in any stocks mentioned. Austin Smith owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, and Netflix and owns shares of Amazon.com, Apple, Netflix, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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