Netflix Still the Default for Streaming Amid Influx of New Options

The streaming market is booming. Dish Network (NASDAQ:DISH) unveiled its Blockbuster streaming service, Hulu crossed the 1 million paid subscribers milestone, Amazon (NASDAQ:AMZN) increased its streaming library by 50% sometime back and pay-TV service providers are trying to stream content to their subscribers like Time Warner Cable’s (NYSE:TWC) iPad app. Add to this Netflix (NASDAQ:NFLX) frustrating hoards of people with its push into streaming. This has created an intensely competitive landscape leaving the customers confused on who offers what and what’s the best way to get access to the shows and movies you want without setting up 10 online accounts.

Netflix is at the center of all of this. Our price estimate for Netflix stands at $195, implying a premium of 50% to the market price.

Customers are Confused

As CNN Money states, customers are confused as there is no service that caters to all of his or her needs most importantly: watching hit shows and new movie releases. These are scattered across different services that all expect them to sign up for their streaming services regardless of the severe limitations. Netflix is probably the furthest ahead in terms of its online library, but they are notoriously limited on new shows and new releases. Customers depend on DVD by mail for these new releases. Dish has rolled out a streaming service and Hulu is trying to get subscribers while entertaining takeover bids.

Nevertheless, we believe that over-time this confusion is likely to come down. As streaming services expand their content library, they will cover a larger universe and are likely to focus on getting important content that matters to these customers. Differences may still remain but it is quite likely that each of these streaming services will have enough good content to appeal to consumers, and then it may boil down to pricing, marketing and customer service.

Content Companies Are Happy

With so many distribution companies trying to grab a piece of the growing streaming spend, content companies will be quite happy. While on one hand content owners are getting their regular dollars from pay-TV service providers, they will also be increasingly monetizing their content on other platforms. And with increasing competition, quality content will be in high demand and thus benefit big content owners like CBS (NYSE:CBS), Time Warner (NYSE:TWX), Disney (NYSE:DIS) and News Corp (NYSE:NWS).

Netflix Still in a Good Spot

Many are frustrated with Netflix given its split and the Qwikster announcement, but who stands the best chance to gain from customer confusing amid the many new players?

Right now we still think Netflix wins this battle as the leading brand that has the largest streaming content library and proven track record. It is true that many subscribers are unhappy with recent service restructuring and pricing changes, but where are they going to go? The other competitors are there but haven’t gained scale yet. As long as the rival companies’ streaming libraries remain small, consumer confusion will persist and Netflix will continue to gain.

Should We Expect More Exclusive Deals?

As streaming companies try to differentiate themselves, having exclusive rights to particular content may be one option. But this will inherently mean that these companies may need to empty their pocket a little more. Who can do that? Dish? Amazon? Netflix? Certainly Dish and Amazon have the upper hand here given their size, but one might ask that how much will they be really willing to spend given that streaming is not really their core business?

We expect that media companies are more likely to strike non-exclusive deals so as to keep the pay-TV providers happy and alongside making money from licensing streaming content.

See our complete analysis for Netflix’s stock