Of internet royalties, e-commerce and your pay TV

The Best for 2015
By Briton Ryle | Monday, January 5th, 2015
Briton Ryle
Well, here we are in 2015. For Christmas this year, I got a touching handmade card from my 12-year-old son, and my dad sent me eight soft-shell crabs that I ate on New Year's Day. 
I rolled 'em in a little flour, flash-fried them crispy, and made sandwiches. They were delicious.
It amazes me that you can get truly fresh soft-shell crabs delivered overnight. These came packed in styrofoam, with ice packs to keep them cold, but not frozen.

I probably shouldn't be surprised at the sophistication of e-commerce these days. It's estimated that worldwide, people spent around $1.4 trillion online last year (2014). This year, it will be around $1.7 trillion and by 2018, nearly $2.4 trillion will be spent online.
With that much money at stake, it's no surprise that companies have gotten pretty good at filling orders and shipping them along...
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In September of 2010, the first "Internet Royalties" were made available to the public.
And on the very first day, investors spent a total of $270 million buying in.
Ever since then, investors have been collecting payouts courtesy of big-time Internet retailers like Netflix, Google, and Amazon.
Daily "royalty" payments so far this year have ranged anywhere from a mere $840 to $94,350.

The U.S. Leads (Of Course)
It should also come as no surprise that American consumers spend the most online. For 2014, Americans spent around $305 billion online. And this year, 2015, we will spend around $350 billion online. Roughly 30% of that — $100 billion — will come during the holiday season.
Yes, online sales currently account for around 7% of total retail sales. But it's growing quickly. In three years, Around 10% of all U.S. retails sales will be made online.
Of course, these figures don't include the money we spend for online services like NetFlix or Amazon.
NetFlix did around $5 billion in revenue for its subscription movie and TV services over the last year. Amazingly, it can still do better. A recent report shows that 48% of U.S. households that do not pay for television service (i.e. cable, direct TV, etc...) have a NetFlix subscription.  So, there's a lot of room for growth there as more Americans turn away from cable and satellite.
And it turns out that NetFlix isn't just an alternative to pay TV. The same report shows that 36% of U.S. households that do get pay TV service alsopay for NetFlix. 
In fact, the "NetFlix alternative" to pay TV may be more of an illusion than we originally thought. In total, NetFlix has 37 million subscribers. Its next strategy for growth may be teaming up with pay TV companies. Two weeks ago, NetFlix inked a deal with DISH to integrate the NetFlix streaming service into the DISH set-top box. That would give NetFlix another ~14 million U.S. customers.
And NetFlix has already signed a deal to be included in Virgin Media set-top boxes in the U.K.
China's Alibaba (NYSE: BABA) may be an even better example of the massive growth that's still to come for the Internet and Internet sales.
The Chinese equivalent to Amazon (Nasdaq: AMZN) already had the biggest IPO ever last year. The company is currently valued at a whopping $250 billion. Revenue is expected to nearly double in 2015, to $17 billion. And it will probably double again in 2016 as Internet use in China goes into overdrive.
Now, I personally don't like Chinese stocks. There's too much potential for fraud there. From government numbers to corporate numbers, there's very little regulation in China, and not many consequences for breaking what few regulations do exist.
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Internet Growth
The fact is, Internet use is growing off the charts. It's growing so fast that they are inventing new words to describe the amount of data it carries. Like “zettabyte.”
Apparently a zettabyte is a thousand exabytes. And I don't even know what a exabyte is (though I looked it up and an exabyte is one billion gigabytes).
internet traffic

They say that in less than two years, Internet traffic will be measured in zettabytes. Traffic has gone up 500% over the last five years, and will go up another 300% in the next five, to get us into that zettabyte territory.
You think we watch a lot of NetFlix movies now? Yeah, they say the equivalent of six billion DVDs travels across the Internet right now. It would take you two million years to watch just a month's worth. And that willdouble by 2018.
That's just nuts.
The key to it all is spending. We spend to get Internet, Internet providers spend to build bigger better networks, and Internet content companies spend to get on those networks.This spending is expected to fund the tripling of Internet speeds in the next three years.
As far as the Internet has come — and as much money as investors have made off Internet companies like Comcast, NetFlix, and Amazon — there's a lot more on the way.
And now, there's an easy way to make money from the massive growth in Internet traffic. And it has to do with the money that companies like NetFlix spend to make sure they get a good connection to your house.
Fact is, you can collect a portion of this loot every few months. Over time it can really add up. Here's what you need to know.
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Briton Ryle
An 17-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.

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