NFLX Stock: Should This Terrify Netflix Inc. Stockholders?

NFLX StockCould Reddit Take Down NFLX Stock? It’s Possible

If recent developments are any indication, it looks like Reddit is trying to become the next Netflix Inc. (NASDAQ:NFLX) or Amazon Inc. (NASDAQ:AMZN). But Reddit has one massive and hard to replicate advantage over these and other media companies which just might give it the edge in the streaming video business. If Reddit succeeds, could Netflix stock take a hit?

Should This Keep NFLX Stockholders Up at Night?

Reddit, an entertainment, social media, and online news website where registered community members submit either original or third-party content, launched its very first impendent video series last week. (Source: “Reddit Has Launched its Own Documentary Series”, Fortune, November 4, 2015.) Echoing the successful efforts by Netflix in creating its own original content for consumption by subscribers, Reddit is banking on the online video streaming niche expanding on a huge scale. Is that a problem for Netflix stockholders? Maybe.

But whereas Netflix takes a ‘top-down’ approach, with the traditional idea pitch and production handled by skilled professionals, Reddit is going about this new expansion in a very organic and grassroots manner.

The new video series, “Cyborg Nation”, was produced in partnership with Conde Nast Entertainment and Wired and focuses on the possible future results of our increasing use of technology in detail life. (Source: “Reddit launches its first documentary series”, The Verge, November 4, 2015.) The launch of this video series is the largest step taken by Reddit, which specializes in social aggregation but has evidently recognized the potential of Netflix’s video streaming service.

Where Did This Latest Effort of Reddit’s Come From?

This idea first originated in a subreddit known as /r/futurology and was picked up as a possible project by Reddit co-founder Alexis Ohanian. (Source: “Say hi to Reddit, the budding Netflix wannabe”, CNET, November 4, 2015.) The development and realization of this idea, from an individual post by a single user which through aggregation was articulated into a workable content pitch, is an interesting case study for why Reddit might hold an intangible asset which could give it the edge over Netflix.

Translation: When it comes to generating ideas, no one can compete with Reddit.

Indeed, Reddit is made up of thousands of communities which have the capacity to generate more original ideas and content in one day than a well-staffed newsroom could hope to produce in an entire lifetime. In a world where the ability to quickly and efficiently discern what is popular and sought-after, one would be hard-pressed to find anything as effective as Reddit. Neither Netflix nor Amazon can hold a candle to the social media platform, and if it can harness this advantage into streaming video production, the Amazon and Netflix price could be in big trouble.

This level of content aggregation and development of unique ideas is complimented by a sophisticated internal voting system, which allows popular posts to rise above others and get noticed. When you consider that the primary difficulty faced by companies such as Netflix when it comes to content creation is figuring out what people like, Reddit’s competitive advantage becomes clear. What Netflix lacks is the ability to quickly and organically survey what people want to watch, but Reddit might just have the golden ticket in this regard. Netflix lacks the large user base to brainstorm video ideas in this manner, and the NFLX stock price could find itself on the downside as a result.

Reddit brings together more than 200 million users on its message boards, where they discuss everything from politics, celebrity gossip, and news stories to fan fiction and food recipes. Just to put that number into perspective, it’s about eight times the number of users who tune into popular online video streaming service Hulu.

Where Reddit Will Go From Here and Why Netflix Stock is in Danger

With such a powerful tool at its disposal to generate new and exciting ideas which are easily quantified as popular with global users, both Amazon stock and Netflix stock could one day face extreme pressure from Reddit, which is still a private company. Of course, this effort will remain small-scale for the moment. Reddit in fact only operates a tiny video production team, and its original video streaming service is very far from approaching anything on the scale currently offered by Netflix. (Source: “Reddit Expands To Feature Original Video With The Launch Of Its First Documentary Series”, Tech Times, November 4, 2015.) What Reddit is hoping to do with this expansion is bring its growing online community to the masses, but in a far more accessible way than would be possible through its current text-based forums.

But original video production does not necessarily always succeed. Take Amazon for example, which launched an organic effort to crowdsource movie and television ideas by allowing anyone to submit ideas. (Source: “Startup Aims to Let Viewers Pick the Pilots to Make Into TV Shows”, Wall Street Journal, November 4, 2015.) What Amazon learned, however, is its submission-based processed was riddled with too many trial and error backlogs that finding successful ideas became too difficult. It was also unable to see anywhere near the crowdsourcing benefits as Reddit.

The Bottom Line for Reddit and What it Means for the Netflix and Amazon Stock Prices

Reddit does not have this issue however, because its business model is in its most basic form a platform for online communities to self-critique themselves and their ideas. What results is a quick, organic, and highly effective way of developing creative issues which can translate into popular streaming videos. The social media company is avoiding problems encountered by Netflix and Amazon by cutting to the chase quickly and efficiently and collaborating with media professionals to create popular but cheap to produce videos.

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