Netflix (NFLX, Financial) achieved a huge milestone in the first quarter by overtaking cable TV subscriptions in the U.S. The trend has been going on for quite some time as cable subscriptions kept dropping while streaming video provider subscriptions kept going up.
Although we’ve known that the day streaming video on demand (SVOD) overtakes cable TV will eventually come, no one really thought it would happen this soon.
One major factor for Netflix’s success – apart from its own growth initiatives – is the prevalent environment. The U.S. market is already hooked to smartphones, and more than 80% of U.S. users are now connected to the internet. The current generation spends a lot time on social media platforms like Facebook (FB, Financial) and YouTube, and the primary device of choice is the smartphone.
Not many would have believed that small screens would actually help an SVOD provider like Netflix because, obviously, we all love to watch our movies on big screens. But the convenience that the Netflix-smartphone combination brings to the table is unmatched, and users are spending more time watching Netflix on their smartphones.
According to Recode, Americans spent 7.5 billion minutes watching Netflix on mobile devices in June 2017, compared to 4.31 billion minutes they spent in September 2014. The number of users in the U.S. has increased during the last few years, but that still doesn’t explain a near 75% jump in smartphone viewership for Netflix in three short years.
Netflix is not just winning the subscriber numbers war in the U.S.; the increasing consumption of its content on smartphones indicates that users are not just watching Netflix from their homes but have also started using the platform on the go, similar to the way we use social platforms like Facebook and Twitter (TWTR, Financial).
With nearly 50% of U.S. households already on a Netflix subscription, the company continues to stay a notch above the competition. Its size, scale and, more importantly, the cash flow it generates allow the company to plough as much as it can back into the business, thus further differentiating the product in a crowded market. The increase in smartphone usage shows that the company is already cementing its position in the vital U.S. market.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
