Shares of Netflix (NFLX) are down nearly 50% year to date for a variety of reasons.
First, there's a pending separation with Liberty Starz (LSTZA) that will end the "Starz Play" feature inside Netflix come February. Roughly 8% of movie and TV content could go away.
Second, there's the substantial price increase on those who have both DVD and streaming service. The bump is widely cited as the reason why more than 800,000 customers fled Netflix last quarter.
Third, Hastings first unveiled and then retracted a plan to separate the streaming and DVD-by-mail operations into two distinct business units with two websites and logins. Customers long used to managing an entire queue of DVD and digital rentals in one place would be forced to adopt new habits via a service Hastings called Qwikster. "Incredulous" may be the best word for describing the response.
Hastings coyly described the fallout in a Facebook post meant to announce a new deal with DreamWorks Animation (DWA). "Moving forward step by step, despite the foot with the bullet hole," he wrote at the time.
My own tracking of how investors see Hastings reveals a fervent belief that he's no longer The Guy for the business he founded. "What he did was stupid. Hubris on this level is truly worthy of a firing," wrote one commenter to a story I published asking whether Hastings was still fit to be CEO.
What if the skeptics are right? What options does that leave investors who are otherwise convinced by a study that shows 61% of viewers ages 12 to 65 watch at least one hour of online video per week. That's up 50% from 2009, according to entertainment researcher Interpret.
Here's a closer look at three companies that could profit from a Netflix meltdown even as traditional TV and online video streaming merge.
1. DISH Network (DISH)
You'd think that most cable operators would benefit from the decline of Netflix, but data say otherwise. According to Interpret, 77% of those who use the Web for TV also pay for premium TV service. Count our family among that group. We're paying both Comcast (CMCSA) and Netflix for programming access.
Why single out DISH if most cable companies don't experience any sort of Netflix effect? The satellite TV specialist also controls the remaining assets of defunct video rentals specialist Blockbuster. Having premium streaming and live programming under one roof could prove compelling to those used to the pervasiveness of Netflix's service.
2. Amazon.com (AMZN)
Mobility is one of Netflix's key advantages. From iPhones to Android handsets to the iPad, Netflix streaming is available just about anywhere. Amazon isn't there yet. So far, only the new Kindle Fire will stream video from the e-tailer's massive library. But that doesn't mean investors should dismiss Amazon. CEO Jeff Bezos and his team have brokered numerous partnerships to bring "Amazon Instant Video" to high-definition televisions, digital video recorders, Blu-ray players, and set-top boxes for connecting to cable services.
Amazon also offers flexibility. Members of the Prime shopping service can either rent or download top-tier flicks or choose from 12,000 titles for free, instant streaming. Revenue and profits should grow as more devices get access to the entirety of this offering.
3. Apple (AAPL)
Can a partner become a competitor? It depends on whether new Apple CEO Tim Cook commits to creating a TV ecosystem that includes everything from an all-in-one television to an upgraded iTunes Store that includes streaming as well as rentals and downloads.
There's reason to believe it will happen. Not only is Amazon taking this approach, but so is Google (GOOG), which tried and failed at marketing a digital entertainment hub called Google TV. Now reports say the company could create its own pay TV service to go along with streaming served through YouTube.
The implication? Apple can't go after the TV ecosystem and not also find some way to address streaming -- either on its own or via an extension of its partnership with Netflix. You can bet Hastings is hoping for the latter.
Do you believe in Netflix? What other companies do you believe would benefit from Netflix's troubles? Please let us know using the comments box below.
Fool contributor Tim Beyers owned shares of Apple, Google, and Netflix. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Google, Apple, Amazon.com, Netflix, and DreamWorks Animation SKG. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.
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