Time to Sell Netflix and Buy Amazon and Apple

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Netflix, Amazon, and Apple logos

Netflix, Amazon, and Apple logos

Disclaimer: I am not an investment adviser of any kind.  Over my long career I have picked some winners and some losers.  But most of my portfolio is in mutual funds with low expense ratios.  The advice I’m giving here is my opinion only.  If you choose to act on it, you’re on your own.

Recent technological developments have led me to wonder whether this might be the right time to sell Netflix and buy Amazon and Apple. The two technological developments I’ve seen recently are included in Apple OS X Mountain Lion and iOS 5.x. Both, however, work only with Apple TV, a small box that will set you back all of $100. Read on.

Apple OS X Mountain Lion (10.8)

Mountain Lion includes a brand new feature that lets you seamlessly and easily mirror your Mac’s screen onto your flatscreen using Apple TV.  We’ve been using it to watch streaming video from Amazon.com.  Get this: Amazon Prime costs $80 per year and allows unlimited streaming of many titles at a price of zero.  Caveat emptor: some videos that show up as available for streaming are not free.  Read carefully and make your decisions before you have that second beer.

Compare that to Netflix streaming: about $96 per year but, frankly, with a crappy title list.  It looks to me like the major studios have decided Netflix is not paying them enough for content and are signing on with Amazon instead.  And Amazon has struck a deal with IMDB.com (the internet movie database site) to place click-through links on IMDB when a title is available for streaming on Amazon.

So let’s spell it out.  Amazon’s deal is cheaper, has higher-quality titles, offers the opportunity for pay-per-view for newer releases, and will work with any flatscreen that supports Apple TV.  Which is all of them.  (Our homemade home theater system is a Vizio 40 inch flatscreen, a Sony amplifier/tuner, a couple of speakers, and Apple TV.  We also have an HD DVD player which we don’t use much any more.)

Apple Airplay

The second option is streaming video wirelessly from your iPhone or iPad to Apple TV via Airplay.  This does not work with Amazon’s mobile streaming app.  However, you can mirror pretty much anything you can put on the iPad screen onto the flatscreen.  The setup can be tricky (click here for a lengthy discussion with many tips), but once it’s working, it works very well.  And the cost of this option is zero — whatever video you can download and put on the iPad you can play on your flatscreen.  (Disclaimer: our tests have not been exhaustive.  We welcome comments about what works and what doesn’t.)

What’s Reed Hastings Up To?

With all that in mind, Netflix CEO and serial entrepreneur Reed Hastings has done something astounding.  The two paragraphs below are from a Wall Street Journal article:

“Reed Hastings, chief executive of Netflix Inc. and a Facebook Inc. board member, disclosed on Thursday a purchase of roughly $1 million in Facebook stock.

In a filing with the U.S. Securities and Exchange Commission, Mr. Hastings disclosed buying 47,846 Facebook Class A shares on Wednesday at a weighted average price of $21.03 each. Facebook’s stock closed trading Wednesday at $20.72.”

Mr. Hastings is on Facebook’s board and apparently didn’t own much FB stock before this.  Perhaps he was under pressure to join the other directors and make a commitment to the company.  Maybe Facebook wants to buy Netflix.  The only reason I can think of for a move like that is Netflix’s one viable asset: their huge inventory of DVD disks.  Their pioneering video streaming technology is probably worth quite a bit, too — to the right buyer.

So maybe I’m wrong.  The downside risk of selling Netflix right now is that some other company might buy them.  Probably not Google because they own Youtube.  But Facebook?  Your guess is as good as mine.

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.

2 Replies to “Time to Sell Netflix and Buy Amazon and Apple”

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