Netflix (NFLX) might not be the first name you think of when smartphone and semiconductor companies settle their differences, but it could be a key beneficiary.
Shares of the Los Gatos, California-based streaming content company were down on Wednesday, reflecting a mixed earnings announcement hampered by headlines citing competition from Disney (DIS) , Amazon (AMZN) , and others.
However, buried in the results was the citation of upside available to the company in mobile streaming.
"I think the most important, the headline message there is actually frankly how much time we don't win on the mobile experience," chief product officer Greg Peters said in a question and answer session on Tuesday evening. "In 97.5% around the world, people are using other different entertainment services, other ways to enjoy their time on their mobile phone. But certainly what we are seeing is that mobile is an increasing way for us to attract new subscribers."
The company currently courts only about 2% of global downstream mobile internet traffic, while it garners 10% peak viewing share in U.S.
Peters speculated that partnerships with handset providers and mobile operators to increase exposure to consumers is a key to narrowing that gap.
What could accelerate that opportunity is the shift to 5G, which will allow more and more consumers to access Netflix content in high quality without a broadband connection. Certainly, 1.4 billion Apple (AAPL) users transitioning to a more video-capable 5G network with the help of Qualcomm (QCOM) would be a serious catalyst.
According to Epiphan, an audio-visual equipment manufacturer, 5G technology intends to be 10 times faster than 4G with target data rates estimated to reach 20 Gbps compared to 4G's max out at 1 Gbps.
That shift could lead to a shift in the way video is consumed, similar to the way audio was transformed by more capable infrastructure for audio programs that were previously unsupported by 2G, such as long-form podcasts. For example, video is shifting towards 4K resolution that strains 4G networks; 5G will be able to support such a shift.
"It's fair to say that 5G will have a huge effect on mobile video," the Epiphan report states. "Downloading full-length feature films will take just a few seconds. You will no longer need to watch TV in your home - you can just carry it with you."
If that becomes a sustainable trend, the upside for a key content provider like Netflix would be undeniable.
Aside from easing access to customers with a broadband connection, the push could open up streaming options to consumers not currently able to access high-quality streaming services.
The FCC announced on April 12 that the government is setting about creating a Rural Digital Opportunity Fund, which will inject $20.4 billion into high-speed broadband networks in rural America over the next decade. The initiative will seek to provide gigabit speed broadband to parts of the country bereft of such connectivity at present.
"These next-generation networks will bring greater economic opportunity to America's heartland, including some of the great jobs building infrastructure, and they will help support future 5G technologies," FCC Chairman Ajit Pai said last week.
According to the Pew Trusts, that could open up 24 million new customers to streaming services reliant on these connections for not only in-home, but mobile streaming.
Mobile Carrier Conundrum
Verizon and AT&T have already indicated that price increases will add charges for use of the next-generation network, despite the lower-cost bandwith provision associated with 5G.
Cost increases could help offset the rural customers that Netflix is trying to engage through far-reaching 5G networks that can upgrade the streaming capabilities of "flyover" states that the Federal Communications Commission has cited as a priority.
More encouragingly for consumers, some providers have eschewed the idea of premium pricing for 5G data usage, something the FCC has made a push for.
"We don't have any expectation of changing your plan," T-Mobile President Mike Sievert told Fortune earlier this year. "5G's arriving now, speeds and capacities will improve, and customers will be able to get all that at an incredible value. We have no plans to change our rate plans...we have no plans to price separately for it on your smartphone."
As a special nod to Netflix, the service is included for free on T-Mobile plans and could help spur growth for customers seeking the lower-cost 5G option.
5G is a well-known paradigm shift for both semiconductors and smartphones and is hurriedly being modeled into expectations for companies in each sector.
However, the impact it could have on video streaming, which is speculated to be similar to the way 3G and 4G revolutionized music streaming, might not be appropriately recognized yet.
As such, investors should be cognizant of the ripple effect that technology can have and assess the opportunity offered across the ancillary industries including autonomous driving, gaming, and, of course, video streaming.