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"DVD's are so five years ago!"
Netflix, which has seen its Canadian streaming-only video service welcomed with usage cap reductions by Rogers Cable, has finally started to wake up to the threat its online video business model is one speed throttle or usage cap away from oblivion.
As the video rental company now contemplates launching a streaming-only version of its service in the United States, it has now firmly waded into the Net Neutrality debate. In a filing earlier this month, Netflix impressed upon the Federal Communications Commission the importance of prohibiting providers from establishing blockades to keep its competing video service from threatening cable-TV revenue:
“The Commission must assure that specialized services do not, in effect, transform the public Internet into a private network in which access is not open but is controlled by the network operator, and innovative Internet-based enterprises are permitted effective access to their consumers only if the enterprises pay network operators unreasonable fees or are otherwise seen by such network operators as not threatening a competitive venture.”
Netflix online video packs a real wallop, as Americans embraces the service as a suitable and cheaper replacement for premium cable movie channels.
Sandvine, which pitches “network management” products to the broadband industry, reported Netflix now represents more than 20 percent of all downstream broadband traffic in the United States during peak usage times between 8-10pm.
The company’s financial results seem to affirm its growing impact as an online video entertainment player. The Washington Post reports in the third quarter, Netflix saw a 52 percent gain in subscribers to 16.9 million. Revenue increased 31 percent to $553 million. But most interesting: 66 percent of subscribers watched more than 15 minutes of streaming video compared with 41 percent during the same period last year. The company predicted Wednesday that in the fourth quarter, a majority of Netflix subscribers would watch more content streamed from the Web on Netflix than on DVD.
That prompted CEO Reed Hastings to say Netflix should now be considered a streaming company that also offers DVD-by-mail service.
If providers launch Internet Overcharging schemes that limit broadband usage or throttle their competitors to barely usable speeds, that growth could come to an end quicker than the introduction of the next “unfair usage policy.”
Sandvine’s research confirmed something else. As broadband speeds increase, so does usage. In Asia where broadband speeds are dramatically higher than in the United States, Sandvine found median monthly data consumption is close to 12 gigabytes per household compared to 4 gigabytes in North America. And Asians stay very close to their broadband connections, using them on average for almost 5.5 hours per day, compared to just three hours for North Americans.
When one considers the majority of broadband users are only starting to discover online video, those numbers are headed upwards… fast.
I love NetFlix but I have to say they are a little late to the game. Odd that it took so long.
Let’s hope that the ISPs haven’t yet bought and paid for all the lawmakers they need to end the net neutrality debate before NetFlix gets in the game.
The reason why it has taken so long is becuase of the studios themselves. They have been real slow to license streaming content. Netflix had to give up the first 30 days of new release rental DVDs just to get where they are today in streaming.
I believe Jeff’s point is NetFlix has been in denial about the ramifications of the Cable Companies protecting their interests by implementing caps to effectively block competition from internet based streaming. With caps and metered data plans they’re able to do this without running afoul of net neutrality regulations because they’re not blocking or slowing the packets, only charging customers an extreme amount of money for the data, limiting usage to nothing more than email and web browsing, thus forcing customers to bundled cable TV for media. Like Jeff said NetFlix needs to start lobbying lawmakers for regulations and support,… Read more »
I agree. They should have started to get in on it when TWC was doing their experiements. I think the biggest problem was, they were not in the same position as they are now. Streaming was kind of an afterthought. But you are right, they should have wieghed in then.
It’s too bad that we have to wait for a big company with deep pockets to influence our own lawmakers that are supposed to be watching out for our interests.
When TWC started their attempt to implement an overcharging scam in Rochester NY, many elected officials were contacted by their constituents but only Sen. Schumer lifted a finger to actually help.
I’m not usually a Democrat, but I’ll be voting for Schumer just the same.
It just shows how badly we need finance reform to limit the influence of deep pocket companies. Companies that do not share the voting publics interest, only that of their bottom line. As an individual, I do not have the funds, nor should I have to delve into a bidding war to get the support of the elected officials that are supposed to represent me. As big and wealthy as some businesses have become, the public does not have the money to compete with them, nor do they get the facetime that lobbyists get day in, day out to influence… Read more »
I appreciated the work of Eric Massa who really got the ball rolling on this issue. I’m just really ticked off that after two election cycles trying to get rid of Randy “the Dandy” Kuhl (who used to hold town hall meetings in a back room with an egg timer), all that hard work was to count for very little after the tickle party nonsense. We have good Democrats and bad Democrats on this issue. Louise Slaughter has her hands full on the Rules Committee but has always tended to side with consumers. Dan Maffei, the Democrat from Onondaga County… Read more »
After being in IT biz for 30 years, it’s always a good idea to plan for growth(in memory, speed, capacity) far beyond what any current capabilities are.
All comes down to Moore’s Law.
Sandvine’s discovery comes as no surprise. People will be more tempted to use a faster connection, thus pulling down more data than they would on a slower connection for example. Good example of this is YouTube HD vs YouTube SD. Those with Faster connections will be tempted to play HD videos, whereas SD will be played by those with slower connections as they do not wish to wait for buffering.
I think one of the biggest problems that is going to arise from all of this streaming is the amount of time your connection is “live”. The cable co’s are not going to like a bunch of people having their connection live for several hours especially during peak usage. I see a BIG battle on its way in the near future over this.
The only reason companies like netflix, HULU, and other streaming content providers are coming to a head with cable companies is because the cable co’s have refused to provide the services that their customers have been demanding for decades. Then comes along the internet with an open IP based network capable of delivering media without any restrictions, without any barriers to entry for competition, and consumers suddenly have a choice in how to get their TV and movies delivered for a fair price. The Cable Co’s refuse to adapt, they still refuse to offer channels Ala Carte so customers can… Read more »
I agree with this. I spent Friday night catching up with the new Hawaii 5-0 on TWC’s Primetime on Demand channel, which I used because it was there and it was convenient. The ad load was similar to Hulu and I stuck with the cable company for convenience. If it wasn’t there, I’d be on the computer watching it that way. If the cable company delivers what consumers want at a reasonable price, they’d have nothing to fear from broadband alternatives. But when they make you jump through hoops for it, or charge far too much money for it, people… Read more »