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Why Is Netflix Focusing on 4K and HDR Content?

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Netflix is expanding its content availability

Netflix says it intends to spend more than $800 million on technological and development initiatives in 2016. Earlier this year, the company indicated that it’s shifting to HEVC (High Efficiency Video Encoding) H.265 technology from H.264 to enable it to stream 4K video content at low bit rates. Netflix stated that Alphabet’s YouTube (GOOG) is another company that has made progress using H.265 technology. Netflix is now expanding the availability of its 4K content.

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According to an April 8, 2016, FierceCable report, Netflix’s UHD (ultra-high-definition) content will now be available on Dish Network’s (DISH) Hopper 3 DVRs (digital video recorders). The report states that Dish Network’s Hopper 3 DVRs offer “native 4K support, decoding and outputting 60 frames per second and 10-bit color.”

Amazon’s (AMZN) Prime Instant Video service is another SVOD (subscription video on demand) provider that’s providing 4K content.

 

Falling prices of 4K televisions 

Netflix is working on providing technical support for HDR (high dynamic range) video content, the next level of high-resolution video. However, HDR isn’t supported by most of the recently released 4K televisions.

When Netflix first introduced content for UHD televisions, 4K televisions were expensive. However, as prices of UHD televisions continue to fall, more people are opting for this option. According to a Quartz report, 4K televisions will make up 57% of total televisions produced globally by 2018. As a result, falling prices of 4K televisions will most likely result in increased demand for 4K content.

Netflix makes up 0.25% of SPY, which has an exposure of 4% to the computers sector.

Next, let’s look at how Netflix’s international streaming business is expected to do in fiscal 1Q16.

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