Netflix: music to my ears; Future of movie site could look a lot like Pandora’s present

January 24, 2014 Leave a comment

January 22, 2014 11:16 pm
Netflix: music to my ears
Future of movie site could look a lot like Pandora’s present

To divine the future of Netflix, think about music rather than video. Netflix is proceeding nicely; it said on Wednesday that it added a better than expected 2.3m subscribers in the US, sending its shares up 17 per cent in late trading.
Recent headlines have been dominated, however, by copycats such as Verizon, Amazon, and Sony which are unveiling rival internet television services. The scrum in TV looks strikingly similar to last year’s tussle in internet radio. Pandora, the pioneer in streaming music, was pronounced dead repeatedly as deep-pocketed rivals including Apple, Google, and Spotify were expected to overwhelm it. But a funny thing happened: Pandora’s market share grew (now at 70 per cent of internet radio) and its stock price has surged more than 250 per cent since the beginning of 2013.
This week, Verizon announced it was buying Intel’s digital TV service, OnCue
. Amazon has been rumouredto be negotiating with cable channels for its own TV service. Sony and Apple also lurk. These services want to offer programming across devices. The challenge for the upstarts is to build an interface that consumers can easily navigate and to acquire the programmes they want to watch.
Pandora’s success is two-pronged. First, its listeners appreciate the algorithm that determines playlists. Second, its 70m users give it unique leverage with carmakers or electronics manufacturers that embed Pandora in cars or TVs. Similarly, Netflix has a large subscriber base (44m worldwide) that often prefers it for its original programming, such as House of Cards.
The question now is how competition will slow, rather than destroy, Netflix and Pandora. Both trade above 85 times 2014 earnings, reflecting how their entrenched positions are expected to translate into eventual earnings growth. For now, investors have agreed that first mover means first place.

Filed under TMT Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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