The Motley Fool

Netflix claims first scalp as EzyFlix folds: What this means for investors

With Netflix adding subscribers like there’s no tomorrow, it was always only going to be a matter of time before one of its Australian-based rivals folded.

Well, the US-based video streaming giant has officially claimed its first scalp with digital movie and TV show store EzyFlix calling it quits. A message on its website read: “Thank you for having been a part of EzyFlix. Access Digital Entertainment has decided to end the service offered on this site.”

For customers who have purchased or redeemed an UltraViolet title through the website (UltraViolet redemption codes are often included with DVD and BluRay purchases), EzyFlix said that they may be accessed through several other digital movie services.

Although EzyFlix did not specify the exact reason why it was closing its website, it is fair to assume the sheer dominance enjoyed by Netflix in the Australian market has something to do with it.

Indeed, recent estimates provided by Roy Morgan Research suggest that Netflix has reached 8% of Australian homes and 1.89 million viewers over the age of 14 in July – an astonishing feat considering the service only hit Australian shores in March this year. Furthermore, 7.3% of Foxtel’s homes were also subscribing to Netflix, highlighting the popularity of the service.


Source: Roy Morgan Research; The Motley Fool Australia

Although EzyFlix became the first business to fold, it is unlikely to be the last. Indeed, the ASX-listed Quickflix Ltd. (ASX: QFX) is also under immense pressure from the US giant, as are local streaming services Presto and Stan.

Even Australia’s own free-to-air networks are facing total destruction. Some experts are suggesting the networks may only have another five or so years left in their existence, making Ten Network Holdings Limited (ASX: TEN), Seven West Media Ltd (ASX: SWM) and Nine Entertainment Co Holdings Ltd (ASX: NEC) a risky bet for any investor.

Meanwhile, we’ve already seen the closure of numerous DVD and CD retail outlets (think Virgin Music, and Brazin’s Sanity) with the destruction of the industry virtually ensured in the long run. Luckily for JB Hi-Fi Limited (ASX: JBH) (which sells DVDs and CDs), the company has diversified well to ensure a smooth transition away from digital discs and has a superb track record for adapting to new consumer preferences.

Australia’s entertainment and media landscape has been changing at a rapid clip, and I expect that trend will continue over the coming years. While there are plenty of opportunities for investors to profit from this, they need to ensure they remain focused on the future and not get caught up in the companies and trends that could soon become irrelevant.

The smart money is looking for up-and-coming smaller companies with huge potential.

Savvy investors are now seeking growth in smaller companies. Discover two stellar small-cap opportunities now, in our brand-new research report, “2 Small Cap Superstars” -- simply click here to download your FREE copy.

Motley Fool contributor Ryan Newman owns shares of Netflix. 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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.