Speed Tests

Interesting. Netflix has a new speed test Fast.com (which consistently pegs my Charter broadband at 16 Mbps).

Compare to SpeedTest.net (which also tested my Charter connection fairly close to 15 Mbps).

Others have found wildly varying results comparing the two testing sites.

How do your results compare?

Aereo and DTV Apps

Interesting look at Aereo and the Dyle and MyDTV apps could undercut the growth and adoption of Aereo.

Aereo plans to roll out to 22 cities soon but if you just need the Dyle and MyDTV apps to pick up the same channels - doesn't that greatly undercut the Aereo value proposition? Right now the apps are free but even if they were priced at just the cost of a single month of Aereo service - say $8 - then it still represents a great value.

My guess is that in the future cell carriers will put together packages with apps like Dyle and MyDTV coupled with an OTT service like Netflix or Amazon Prime. Think about a company like Verizon Wireless and what they could do with a couple apps like Dyle and MyDTV coupled with their new Redbox Instant service. An almost perfect combination.

Makes sense.

The State of Netflix

Interesting look at where Netflix is today and how it got there.

I don't think there is any way the stock ever gets back to the $300 neighborhood it was in 2011 but I am bullish on the stock. I think the company can either get acquired or it can become the on-line equivalent of HBO.

HBO has a big advantage in original programming because of its long history and the subscribers expectations of quality from the HBO brand but Netflix's on-demand library beats HBO's channels showing the same movies over and over.

The article is worth the read.

Tiered Cable Data Plans

Interesting look at possible tiered data plans for heavy data users. My initial reaction is "big deal".

Near the end of the article it is mentioned that Comcast has a data tier that allows for "300 gigabits per month - or about 130 hours of Netflix HD videos." Think about that for a minute. That's 4.33 hours of HD video a day. Good chance someone doing that is probably a cord cutter - and why should the cable company subsidize Netflix? Plus - as encoding algorithms advance less and less bandwidth will be needed for the same amount of video.

If in the future both cable and telcos will be the equivalent of dumb pipe providers - why shouldn't they get to charge for how much you drink from the pipe?

Netflix Signs Deal to Stream Disney Movies

Netflix has signed a deal to stream Disney movies.

First let me say that I was amused by the headline writer for that article calling it a "blockbuster" deal. I wonder if the pun was intended. The deal allows Netflix to stream older movies immediately, direct to video movies starting next year and their first run movies months after release starting in 2016.

The analysis of the deal in the article was lacking though. The reason Wall Street likes this deal is because Carl Icahn's investment has put Netflix into play and this deal with Disney adds value to any potential suitor. How hard is that to understand?

Carl Ichan and Netflix

Looks like Carl Ichan is convinced that Netflix is in play. Ichan converted his options into actual stock - a move that will allow him to better leverage his just under 10% stake in the company in any proxy battles.

The article mentions Amazon, Microsoft and Verizon as potential suitors. I've said it before that of those three Verizon makes the most sense since they are trying to build a Netflix-light with their Redbox Instant venture as it is. Why not spend $4 billion for the real thing?

I would also mention a company like Level 3 as a potential suitor. Reed Hastings the CEO wants to keep Netflix independent. A Level 3 ownership could allow Netflix to be a wholly-owned subsidiary and at the same time give Hastings that independence as long as he uses Level 3 pipes.

It looks to me that Ichan's strategy is to force Hastings to find a suitor of his liking to prevent a takeover being forced upon him. Either way Ichan will win. Either way - Netflix is in play.

Why Netflix Might Be an Attractive Target

Very interesting report that Netflix now accounts for 33% of the residential downstream peak traffic in North America. Nobody else is even close.

I speculated that one of the reasons that Verizon may have started the joint venture with Redbox was to insure that whenever possible the Redbox Instant traffic would be traveling on Verizon pipes. What would 33% of the peak residential traffic in North America be worth to Verizon? Would wrapping up that traffic and the revenue that it entails be worth a little north of $4 billion (what it would probably take to buy Netflix)?

I've seen a lot of articles talking about who would be interested in actually buying Netflix and all of them name the same usual suspects - Amazon, Verizon, Google, AT&T but I think there could be others for whom the purchase might make more sense.

Think of a company like Level 3 Communications. They could buy Neflix and tell Reed Hastings to just keep running the company as he has done with one little stipulation - all traffic on Level 3 pipes whenever possible. In turn Level 3 could increase Netflix's profitability just by making network usage more efficient.

Or think of a company like Akamai. They could also drive profits by making Netflix's network usage more efficient while at the same time using Netflix's traffic to get better deals for existing CDN business. It would be a very bold move by Akamai but it very well could be worth it.

If Netflix does get purchased - I'm guessing it won't be by one of the usual suspects (except maybe Verizon).

What Next for Netflix?

Very interesting article looking at Carl Icahn's investment in Netflix. Seems like a smart investment for Icahn as just his involvement has generated buzz that Netflix may be in play and as the article points out - since he owns less than 10% of the company - he can get out at any time. The Netflix stock has increased roughly $10 just in the few days since the announcement of Icahn's investment in the company.

There could be a number of companies that would be interested in swallowing Netflix. Some have mentioned either Amazon or Verizon and I would add Google to that list. But it is Verizon that most interests me.

Verizon has a partnership with Redbox (a Coinstar company) to launch Redbox Instant later this year or Q1 2013. If Verizon were to buy Netflix then they could both gain the lion's share of the movie streaming business and maximize the value of their content agreement obligations which represent the biggest liabilities for companies like Netflix and Redbox. If Verizon does not go after Netflix and someone else does - it will be interesting to see if the purchase price for Netflix is more or less than what Verizon invested in the Redbox joint venture. If it ends up less - then that could be a sign that Verizon did not properly gauge the market for their new venture.

Redbox-Verizon Streaming By End of Year?

Interesting article updating the Verizon-Redbox co-owned Redbox Instant product.

One flaw that I would say exists about the article is that it never even mentions the Dish Network owned Blockbuster  at Home product. With over 14 million subscribers to Dish Network and with over 25,000 titles in their Blockbuster at Home library (of which over 10,000 are available for streaming) - it seems silly to overlook this potential rival to Netflix, Amazon and Redbox Instant. In fact - if Redbox Instant grew to just the current size of Blockbuster at Home it would be viewed as a wild success.

Edit: Please note that Blogspot does not allow the "at" symbol. That's why Blockbuster at Home is spelled the way it is.

Cord Cutting?

Another article talking about cable companies losing 400,000 subscribers last quarter. Of course I would expect those numbers to be made up in later quarters and the overall comparison to last year to be a wash.

Two thoughts keep popping up every time I see one of these articles:

1. Say an older couple who had cable moves out of an apartment and younger tenants take over who never bother to add cable but who sign up for a better broadband service than the older couple had - do these new tenants count in the statistics as cord cutters? Technically they never had a cord to cut. Also the revenue from the broadband service may be greater than what the older couple was paying for cable (and with a greater gross margin). How is this a bad thing?

2. Articles like this always seem to bring up Netflix and Hulu like these services don't also contribute to the content providers bottom lines. In the example above the new young tenants are probably consuming more content then the older couple who may have just watched local news and sports.

Apple TV and Hulu Plus (Continued)

Here's some additional thoughts on Hulu Plus being added as a channel to Apple TV: