The New Algorithm Could Help Netflix Stock to Climb
Netflix, Inc. (NASDAQ:NFLX) is bringing about a significant change in its service to extend its dominance in the online streaming industry. It could be just what the company needs to shut out rival Amazon Prime and boost NFLX stock.
Netflix is working on a new bandwidth-saving feature on its platform that will allow users to save on data usage and also make the streaming experience better for its subscribers during peak hours.
Simply put, the speed of your Internet will determine the level of quality at which you’ll watch your favorite movie or show. Netflix has come up with an algorithm that will encode all of the content on its service into different levels of video quality based on varying bitrates. Netflix will then serve the best quality of content based on a user’s Internet speed.
Users on slower speeds will be fed lower bitrates and those on faster connections will be served higher bitrates. This way, the service will automatically shift to the best possible content quality, without hampering the stream.
Now, Netflix alone ends up driving about a third of the country’s total traffic during peak hours. During these bottleneck hours, especially at night, the traffic peaks for Netflix’s high-quality content. Ultimately, Netflix’s users become party to choking the country’s bandwidth, bearing negative affects on the user’s experience.
According to reports, a test for the new feature is already underway and if successful, it could lead to 20% in bandwidth savings. (Source: “Netflix’s Ongoing Quest To Save Bandwidth,” TechCrunch, December 15, 2015.)
Another way the move will help Netflix is by allowing it to increase its market share in countries where Internet speeds are modest. Take, for instance, India, where Netflix is planning to launch in the coming year. The Indian market, although the second-biggest in terms of population, doesn’t have access to Internet speeds enjoyed by the wide population here in the U.S.
This will also open its doors to the African and Middle–Eastern markets where an Asian company that closely copies Netflix, iFlix, is about to take a lead. (Source: “Asian Netflix Clone iFlix Is Raising $150M To Expand To Africa, Middle East And Europe,” TechCrunch, December 16, 2015.)
Netflix’s latest move will certainly prove a boon for NFLX stock, as it will bolster its position in the streaming industry as the most widely available and easily accessible service.
The coming year is expected to be huge for the company, as Netflix expands its foothold beyond North America. Currently, its international subscriber base is a little over 20 million, but with recent expansions in Spain, Italy, Australia, New Zealand, and Japan, not to mention future expansions in countries like Singapore and India, Netflix is about to see a massive spike in its international userbase and consequently, its profits.
The Bottom Line on NFLX Stock
Netflix is, hands down, the most popular streaming service in the world. The company has not only beaten traditional cable companies, but it also eclipses its rivals Hulu, Amazon “Prime Video,” and HBO when it comes to total subscriptions.
Netflix offers some of the most popular on-demand content and is actively creating original award-winning content. Last week, Netflix bagged the most nominations for the Golden Globes, beating rival streaming services and even the famous cable networks like ABC and CBS.
With stats like these, one is forced to grant Netflix the status of an undisputed leader in premium online streaming, making NFLX stock a promising growth play that’s worth a second look. One would be a fool to bet on the wrong side of Netflix stock.