Netflix-vs-Hulu-Plus-vs-Amazon-Prime

The end of cable, but who will win the internet TV

 

Netflix

 

 

 

 

 

 

 

 

 

 

 

 

Its no big surprise that American and soon everyone around the world will cut cables and move away from cable TV to internet TV. This transition is similar to how mp3 disrupted CDs. Internet TV accessible on mobile phones, tablets and smart TV at a much cheaper cost will soon replace expensive cables.

E.g in Singapore, a basic setup box from singtel or starhub will set you back about $50 bucks a month. Not to mentioned these are just the basic channels, if you like additional channels like HBO prepare to pay and pay even more. To cut the cable, simply subscribe to VPN services such as strong VPN (55 bucks a year)  and sign up with folks like Netflix (9.99 USD per month) or Hulu (7.99 USD per month) or Amazon Prime ($99 per year) to enjoy awesome shows at cheaper price. You would essential pay about $200 SGD a year (with tons of access) instead of  $600 a year (with limited channels).

3 major companies currently dominate the the US market for paid internet video streaming. Netflix is current market leader with more than 50 Million subscriber, Amazon follows behind with more than 20 Million subscriber and Hulu trails along with 5+ million subscriber.

 

Netflix

Netflix is not just the market leader in terms of subscriber, it is also the market leader in terms of video contents. It is of no surprise that many choosed Netflix over Hulu as Netflix has superior content. Over the last 12 months, Netflix  has increase 77% trading at $459 with a P/E of 138. I feel that Netflix is still a high growth business with above average risk with strong reasons that it can still go even further.

1) International Market

Netflix is scheduled to launch in Germany, France, Austria, Switzerland, Belgium, and Luxembourg in September. This will provide exposure to more than 60 million broadband households, significantly increasing Netflix’s international presence and raising the company’s global addressable market to more than 180 million broadband households, twice the number of current U.S. broadband households. 

2) Increasing Profit Margin

Netflix recently raised its price from $7.99 to 8.99 for new members. That did not result in any decrease of membership addition, in fact its YOY/QOQ membership addition continues to grow. No reason not to as more household purchase smart tv, more consumers will use such streaming services.

3) Exclusive contents

Exclusive contents is a double edge sword, with high level of investments and risk. However netflix has done well so far as its original contents House of Cards and Orange is the New Black is critically successful. Netflix has potential upsize over the years to come, however I believe that it is currently overbought with potential of a huge correction should there be any miss in revenue growth or membership growth.

 

Amazon 

Amazon price has increase 17% over the last 12 months. Amazon entered the TV market much later than Netflix, while currently not a market leader in the online TV, it has huge potential to over take Netflix as the market leaders. Here’s why;

1) Amazon Prime perks

Amazon Prime comes with a multitude of  perks that includes 2 day free delivery services, free ebook lending, free music library and of course video streaming. For just $99 a year, that is actually cheaper than Netflix given the amount of perks Amazon prime provide.

2) International Presence

Amazon is well positioned for international growth. Unlike Netflix, Amazon is already well established in Europe and rolling out its prime services will be a piece of cake.

Despite its potential to overtake Netflix, investing in Amazon is an entirely different matter. Amazon is well diversify in the internet world from web servers, to e-commence and now internet TV. Despite making 74 Billion in year 2013, it manage to almost spend all of it – resulting in little net income and an extremely high P/E ratio. Amazon behaves like a start up despite it is not one – that is one reason to buy Amazon, as it continues to dominate in e-commence and web services.

Hulu

Hulu is a privately owned joint venture by NBC, Fox, Disney. Its viewership has decreased over the past few years. Unlike Amazon and Netflix, Hulu serve ads, which is a huge draw back for most consumer. Not surprising that consumer choose Netflix or even Amazon over Hulu.  Its just a matter of time before Hulu gets buy out or discontinued.

 

*At this point of writing, I owned shares of Amazon.