Here’s how you can profit from Netflix’s arrival into Australia

Netflix hit Australia earlier this week, causing enormous headaches for companies such as Ten Network Holdings Limited (ASX:TEN), Nine Entertainment Co Holdings Ltd (ASX:NEC) and Seven West Media Ltd (ASX:SWM). But one industry stands to benefit

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Online streaming giant Netflix hit Australia and New Zealand shores earlier this week in what was one of the most hotly anticipated events so far this year.

While early estimates suggested that the service could attract some 200,000 Australians, the company has since stated that it is aiming to be in one in three Australian homes within seven years, according to the Business Spectator. Indeed, its debut may well have changed our entertainment landscape as we know it.

Right now, the programs available to Australian subscribers are somewhat more limited than those offered around the world. As reported by the Sydney Morning Herald recently, the Australian Netflix offers 1,326 titles, which is roughly 7,000 fewer than the US version offers and nearly 3,000 less than those offered in Canada. However, Netflix should build its list of titles as time goes on, enhancing its program offering and dominance in the local market.

Netflix offers three payment plans which are similarly priced to its plans in the US. Here is a summary of those plans:

  1. $8.99 per month, streaming content on one screen in Standard Definition (SD)
  2. $11.99 per month, streaming content on two screens in High Definition (HD)
  3. $14.99 per month, streaming content on four screens in either HD or 4K (Ultra HD)

As beneficial as Netflix’s arrival in Australia will be for people looking for some cheap and high-quality entertainment, it also has the potential to be very damaging for numerous Australian companies, and even industries.

Foxtel

As highlighted by the Fairfax press, a new report by Venture Consulting showed that nearly 10% of Foxtel’s customers are considering cancelling or downgrading their current subscriptions in favour of online streaming services. Foxtel, which is owned by Telstra Corporation Ltd (ASX: TLS) and News Corp (ASX: NWS), recently slashed its prices and released its third-generation digital recorder, the iQ3, in order to retain and grow its customer base.

These moves could certainly help Foxtel weather the Netflix storm. The Australian recently quoted Netflix’s CEO Reed Hastings as saying “(Netflix) is not a substitute, people are not cancelling cable to watch Netflix.” Firstly, Foxtel suits some Australians better due to slow internet speeds while it also offers sports (and Game of Thrones), which Netflix Australia does not.

Free-to-air networks

Companies such as Ten Network Holdings Limited (ASX: TEN), Nine Entertainment Co Holdings Ltd (ASX: NEC), Seven West Media Ltd (ASX: SWM) and even Fairfax Media Limited (ASX: FXJ) have been facing strong headwinds for years as advertising dollars (and indeed, viewing hours) are increasingly being focused online (think Facebook and Google).

While these companies have launched rival online streaming services to contend with Netflix, including Stan (owned by Fairfax and Nine) and Presto (owned by Foxtel and Seven), they still stand to lose advertising revenues. As such, investors would be wise to avoid this sector.

The ‘Data Boom’

Although Netflix is a great brand (and arguably, a great investment), it trades on the US NASDAQ under the ticker code NFLX, restricting most Australians from investing in the streaming giant. While you could open up a US trading account to gain access to the stock, you could just as easily benefit from its Australian rollout by investing in the booming local telecommunications industry.

In order to stream the programs offered by Netflix, Stan and Presto, enormous amounts of data must be transferred which is made possible by companies such as iiNet Limited (ASX: IIN) and Telstra. TPG Telecom Ltd (ASX: TPM) and M2 Group Ltd (ASX: MTU) are two other telcos that stand to benefit from the data boom, and both represent excellent investment opportunities right now.

Motley Fool contributor Ryan Newman owns shares in Facebook. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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