Some people seem ready to toss Motley Fool Stock Advisor recommendation Netflix
What the naysayers say
(NASDAQ:CSTR)RedBox will kill both Netflix and Blockbuster (NYSE:BBI). DVD vending machines are the way to go!
- The only way Netflix can save itself from obsolescence is by offering video game rentals.
- If digital video streams ever become a viable business model, content producers will bypass middlemen like Netflix and TiVo
(NASDAQ:TIVO)and sell directly to consumers on their own.
- But of course, that's ridiculous -- there ain't enough Internet bandwidth available to make streaming work for everyone.
Why they're all dead wrong
- RedBox serves a different demographic than Netflix does. Those vending-machine rentals still come with late fees and drives to the store. Netflix doesn't, whether you're into DVD mailings or online video streams.
- Leave the video games to veterans of that sector, like Blockbuster -- and perhaps GameStop
(NYSE:GME)somewhere down the road. The Netflix model works because the company has chosen a very specific business and gotten very, very good at it. Plus, you really can't mail bulky game accessories like Guitar Hero axes or Mario Kart steering wheels. Good luck, Blockbuster. You'll need it.
- Uh, no. That's like saying that book publishers would cut libraries and bookstores out of the loop, or that Web publishers would ignore Google
(NASDAQ:GOOG)to, I don't know, start spamming the inboxes of the world with direct links. There will always be a demand for good central points where you can find the content you want. And thanks to lessons learned from the by-mail business, Netflix is already extremely good at connecting users to the movies and TV shows they want.
- Another big, fat "no." If the Internet backbone becomes a bottleneck, edge servers from Akamai
(NASDAQ:AKAM)and its rivals stand ready to ease that pain. Cable providers are rolling out chunky DOCSIS 3.0 pipes everywhere, with increasing competition from fiber-optic networks and high-speed WiMAX.
The demand for streaming video already exists. Data from the Feedflix.com service shows that early adopters already watch more streamed video than mailed DVDs from Netflix today. "It is likely that 2009 will be the first year when Netflix will stream more titles through their Instant Watch service than they will ship DVDs," the site states, although their sample is admittedly small relative to Netflix’s total users.
The Foolish lowdown
It's very simple: the biggest doubts I hear about Netflix and its future just don't make sense. You can pry my shares from my cold, dead fingers -- but only when the digital entertainment revolution is over, and Netflix has come out on top.
Fool contributor Anders Bylund owns shares in Netflix, Akamai, and Google, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like. The Motley Fool is investors writing for investors.