Netflix (NASDAQ:NFLX) was certainly a disruptor even in its early days.
When Blockbuster Video looked like it was going to dominate the home entertainment market, there was little thought that Netflix was going to become the David to its Goliath.
First there was the transition from video to DVDs, which laid waste to many small video shops, since it meant having to re-buy all the content for a new format, or worse, have a DVD and a video copy of all the content. That’s how a national chain like Blockbuster could make significant inroads — its scale allowed for better margins.
NFLX Stock Brought Down Goliath
And the video business, for all those reading this who don’t remember these days, was largely built on late fees, like banks charge ATM fees and overdraft fees.
But Netflix went after the entire industry but hitting them exactly where they were most vulnerable — in those fees.
You would subscribe to a plan and then you would put movies in your queue.
When you returned a movie, the next one would be shipped – that’s it. No late fees. Just a low monthly fee.
Granted, you couldn’t get a movie the same day, but Netflix’s library was pretty extensive and if you wanted a same-day movie, you could still hit the video store. But little did anyone think that NFLX would take that interesting model and come to dominate the online entertainment market like it has.
And for years, as Netflix grew, they thought that it was all too good to be true and eventually the “fad” would wear down, or that big legacy entertainment companies would crush it (or buy it) before long.
But none of that happened. NFLX’s rise and move toward digital was timed perfectly to the rise in mobility. That meant bandwidth growth, which meant viewers were now able to stream content from anywhere they had a screen.
When cable cutting became the next wave in content options, NFLX stock was one of the leading default choices for cable cutters. The legacy content providers were caught flat-footed, assuming their size and command of cable would keep them safe from any upstart competition.
Meanwhile, Netflix just continued to pour its money into more content and extend its reach around the globe. Now it can cross-sell all its original content across all its markets.
In the past 3 years NFLX stock is averaging more than 70% a year. And since its IPO Netflix is averaging slightly more than 1,300% annually for the past 21 years.
This year, even after the downturn, Netflix is still up 62% and just posted stunning membership growth. It’s also putting down roots in India, and has its sights set on China as well.
The fact is, there are still enormous opportunities for NFLX to continue this kind of growth for a very long time. And leadership has proven it knows how to grow without over-extending itself.
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Source: Investor Place