Netflix: Another Example of Successful Technology

Just today, Netflix shares (NYSE: NFLX) jumped up 16% to reach $385.62 after a favourable earnings announcement. This represents one of many indicators of the success this video streaming giant has achieved over the past year. In 2013, Netflix was able to gross over $4,000,000,000 ($4 billion has a lot of zeroes) in revenue through its streaming services alone. This 16% increase marks the largest gain in the S&P 500 index (SPX: IND) over the past year.

Looking back just a few decades ago, companies such as General Motors and GE were applauded for their ability to produce high quality, tangible products. These blue-chip companies represented the forefront of business and what companies then strived to achieve.

Now into the 21th century, technology has made it so less and less companies need their products/services to be tangible, in order to provide value. The service that Netflix provides, like many other tech companies, is sourced essentially from computer code made up of 0s and 1s, all powered by hardware and electricity. As of 2014, three out of ten of the the top 10 companies in the world by market capitalization was made up of technology stocks (Apple, IBM, and Microsoft). In the US stock market, Technology stocks now represented the 2nd largest sector by market capitalization, just under Consumer Goods; decades ago, this would have never happened. 

Even looking at just the video service-provider industry, we all saw first hand how technological innovation into virtual streaming was able to destroy the classic video store model... which led to the loss of our good friend, Blockbuster in 2010.

Netflix is just yet another example of how we are in the a new era of modern technology, and demonstrating how virtual and intangible ways of business can add tremendous value to our lives, as well as our wallets. 

So with all that in mind, I leave to you all a few questions:

Do you think technology will ever become the largest market sector? Where do you see Netflix going in the future? How can blue-chip companies innovate to survive?