The Proficient Investor

For a long time on Wall St, the question was who was going to win the dvd by mail war. It was Blockbuster (BBI) v Netflix (NFLX) almost exclusively. Most analysts predicted Blockbuster was going to take Netflix down because they had a “triple play”. So-called because they have traditional brick-and-mortar stores, online dvd delivery and the ability to trade in your dvd at the store for a free rental.

Whoo! Were those analysts ever wrong. Blockbuster hasn’t been able to dig its way out of the 6 foot hole its in. In the last year the stock has gone from the mid 7s to less than half that at $3.01. Still think BBI has legs? Think again.

Netflix on the other hand (which I have been supporting all this time) is dead even over the last year. Sure, it has been a bit of a roller coaster but only because most people don’t understand the business model and can’t think far enough ahead to realize they are way ahead of the curve. While Blockbuster was offering trade ins for DVDs, Netflix was rolling out their instant viewing software (for windows based systems only).

Now along comes Apple and I’m reading the same crap from analysts and the media. “Netflix should worry about Apple”, “Apple takes on the online movie market to beat out Netflix”. You know what? It’s the same crap, different day.

Apple, in my opinion is missing the mark. I love their products and I own stock in Apple right now, as I have been waiting for the Netflix correction to stabilize, but Apple’s most recent announcement at MacWorld really baffled me. I love that they have movies you can rent. I love that you can transfer them to Apple TV and your iPod. What I don’t love is the price! $2.99 a pop? Are you serious? No monthly membership fee?

For $18 a month, Netflix offers me 3 DVDs out at a time and unlimited, yes I said UNLIMITED online viewing of movies. Apple, through their iTunes store and software offer me downloadable movies from “the big studios” for $3 a pop. Hmmm…what’s the better deal here? I can get 6 movies for $18 from iTunes for up to 30 days, or I can get watch as many movies as I want in addition to having 3 DVDs at home for the same price. Gee, what should I choose?

Granted, Netflix online viewing software only works on windows based machines, but that works out perfectly for me. I have 3 windows based computers and an iMac. I can’t lose.

So, does Netflix really need to worry about Apple now? I don’t think so. Movies on iTunes don’t run well on my machine anyway and so all I use iTunes for is my music and podcast library and to download small videos to watch on my iPod.

In the long run I think you are going to see Apple hit $225 because they are always innovating and I think sales of their new laptop as well as the newly revamped Apple TV are going to go well. I see Netflix going to $27 in the next 6 to 18 months based on their earnings and growth. I think you buy both right here. Both are great companies and in my opinion aren’t competing against one another at all.

I own stock in Apple, but nothing else mentioned in this article.