How you can profit from Netflix's enormous growth

Netflix continues to flex its muscles while Ten Network Holdings Limited (ASX:TEN), Nine Entertainment Co Holdings Ltd (ASX:NEC) and Seven West Media Ltd (ASX:SWM) continue to tremble.

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Netflix hit Australian and New Zealand shores just over three months ago, and has already made its presence well and truly felt.

According to data from Roy Morgan Research, more than 1,000,000 Australians across 400,000 households had subscribed to the streaming video on demand (SVOD) service as at May 2015, compared to the 766,000 Australians and 296,000 homes subscribed in April.

Unsurprisingly given those growth rates, Netflix has well and truly outpaced local rivals Presto, Stan and Quickflix Ltd. (ASX: QFX). The data showed that these three services had registered 97,000, 91,000 and 43,000 subscribers as at May 2015, respectively, in what has clearly been a one-sided performance.

Netflix

Source: Roy Morgan Research

The landscape of Australia's media and entertainment platforms has been completely altered since Netflix's arrival Down Under, with the nation's free-to-air television networks such as Ten Network Holdings Limited (ASX: TEN), Nine Entertainment Co Holdings Ltd (ASX: NEC) and Seven West Media Ltd (ASX: SWM) under enormous pressure to retain their advertising share.

(Note that Netflix does not derive its revenue from advertising, but less advertisers are employing free-to-air television as less and less consumers switch onto their networks in favour of services such as Netflix).

At the same time, Foxtel, which is owned by News Corp (ASX: NWS) and Telstra Corporation Ltd (ASX: TLS) has been forced to lower its prices with data from Australian budgeting app Pocketbook in May showing that 13% of Foxtel customers were already trialling Netflix, while 6% had already switched to Netflix or Stan.

Of course, there are a number of variables that need to be taken into consideration before one can truly judge Netflix's dominance. Firstly, some subscribers are still enjoying free trials for the service, so some may drop off as those trials end. On the other hand, Game of Thrones Season 5 has recently finished airing on Foxtel (and won't return until early next year), which could see more consumers make the switch to the cheaper (and faster growing) service that is Netflix.

Although most Australian investors cannot invest directly in Netflix through the ASX (it trades on the NASDAQ under the ticker-code NFLX), investors could look towards Australia's telecommunications sector to profit from the enormous data requirements that make Netflix's services possible. Personally, I think M2 Group Ltd (ASX: MTU) is amongst the best options and deserves a position on your watchlist.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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