Study: Netflix is a
growing threat to TV
Finds nearly a third of streamers likely to ditch pay TV service
By Bill Cromwell
Jun 16, 2011
Netflix has always been adamant about defining its services as a complement to traditional television, and not a replacement.
The online rental service is dependent on partnerships with TV producers and doesn't want to antagonize them by appearing to be in competition with them.
But a new study finds that for many users, Netflix is not complementary to pay TV service. It's looking more and more like a substitute.
The Diffusion Group, an analysis and market strategy firm, finds that Netflix streamers, those who stream the service to their connected devices, are twice as likely to cut the cord as they were just a year ago, apparently satisfied that they can get all they need from Netflix rather than cable or satellite subscriptions.
Thirty-two percent of respondents said they were likely to downgrade their service over the next six months, compared to just 16 percent last year.
The study's authors say that this indicates that Netflix has indeed become a threat to pay TV services, and that the growing use of Netflix will lead to service downgrades and cancellations over the coming years.
"Despite its rhetorical positioning, both Netflix and pay TV operators have long been aware that there will come a point at which its services are not only dilutive to regular TV viewing but antithetical to pay TV subscription levels," says Michael Greeson, TDG founding partner and director of research.
"The question for realistic observers has been not if this will occur but when. According to our latest research, that time is upon us."
Nearly half of the Netflix streamers surveyed cited economic concerns as the reason for cutting pay TV.
But some simply prefer the convenience of the Netflix model. More than one-third said their growing use of online video was the reason for their desire to cut back, and among heavy Netflix streamers that percentage grew to 61 percent.
This certainly won't help the relationship between Netflix and content providers, which became more strained earlier this year when the online rental service announced plans for its first-ever original TV show, "House of Cards."
Following that acquisition, pay cable network Starz said it would delay the release of new shows on Netflix, while Showtime said it would no longer allow its originals to air on Netflix.
Netflix has more than 23.6 million subscribers, more than Showtime or Starz, and added 3.6 million alone during first quarter of this year.
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