Netflix Crushing the Digital Movie Competition

March 15, 2011 at 5:52 am PT

If you’re going to pay for a movie over the Web, you don’t have to use Netflix. But there’s a very good chance you’ll do just that: A 60 percent chance, says NPD.

The consumer tracking outfit says Reed Hastings’ company owns 61 percent of the market for digital movies, with Comcast running a distant second at eight percent. There’s a three-way tie for third between DirectTV, Time Warner Cable and Apple.

None of which should be terribly surprising: Netflix is in the midst of a go-go growth boom, and while not all of its 20 million subscribers are using the company’s Web video service, many of them are. And a third of its new customers are signing up for its Web-only option.

Meanwhile, Apple’s iTunes movie store, which sells and rents films on an a la carte basis, has yet to catch on as well as Steve Jobs would like. And if you’re going to rent a movie from the cable guys, it seems much more likely that you’ll rent a movie via cable, directly to your TV.

More surprising is NPD’s assertion that digital video “now makes up one quarter of all home video volume.” I’ve got some questions about that statistic: For instance does it include all video, or just movies? And all video, or just legally purchased stuff? Etc. I’ll report back if I can get more detail from the company.

Release:

Six Out Of 10 Digital Movies Are Streamed via Netflix

NPD’s VideoWatch Digital tracking service reveals that subscription streaming, digital movies purchased online, and Internet and cable video-on-demand (VOD) services are becoming a part of many Americans’ entertainment diets.

PORT WASHINGTON, NEW YORK, March 15, 2011 – According to a recent review of the home video market in the U.S. by The NPD Group, a leading market research company, Netflix’s share of digital movie units, downloaded or streamed, reached 61 percent between January 2011 and February 2011, followed by Comcast at 8 percent, and a three-way tie for third at 4 percent among DirecTV, Time Warner Cable, and Apple. Based on information from NPD’s new VideoWatch Digital tracking service, digital video now makes up one quarter of all home video volume.

“Sales of DVDs and Blu-ray Discs still drive most home-video revenue, but VOD and other digital options are now beginning to make inroads with consumers,” said Russ Crupnick, entertainment industry analyst for NPD. “Overwhelmingly digital movie buyers do not believe physical discs are out of fashion, but their digital transactions were motivated by the immediate access and ease of acquisition provided by streaming and downloading digital video files.”

NPD also compared consumer-reported satisfaction with four modes of digital-video acquisition: electronic sell-through (EST), Internet VOD (iVOD), cable VOD, and subscription streaming. Consumers clearly recognize that EST services like iTunes have the most “current releases available,” while Netflix streaming gets credit from customers for providing the best “overall shopping experience” and “value for price paid.”

Data note: The information in this press release is from VideoWatch Digital, which is based on online surveys of U.S. consumers age 13 and older conducted between January and the third week of February 2011. The final reporting is based on 10,618 completed surveys.

Tagged with: Apple, Comcast, digital, DirecTV, entertainment, entertainment feature, Internet, iTunes, MediaMemo, Netflix, NPD, Reed Hastings, software, television, Time Warner Cable, video

comments so far. Add yours.

http://pulse.yahoo.com/_SJRF62RIJISG2BCKBZYFF34SEI osxcloner

iTunes has 200 million and counting.

Netflix has maybe 1 yr then slide
http://www.facebook.com/people/Tony-Mills/1099638671 Tony Mills

Netflix is Apples partner. They complement each other. Netflix does not sell or rent movies. You subscribe for “on demand” content, or you request a disk. Apple lets you buy or rent digital content by download. This makes for a symbiotic relationship. Apple does not have to get in the “Streaming” business. Netflix gets an ‘in’ to how many million devices? Good for both sides, Win/Win.
http://www.tnl.net Tristan Louis

It may have 60% of the views but that doesn’t mean it has the title. For example, it only has 10% of last year’s box office winners (see http://www.tnl.net/blog/2011/0.....streaming/ ) and 5% of the top 10 at the box office for 2005-2010 (see http://www.tnl.net/blog/2011/0.....ical-view/ )
http://www.twitter.com/rurikbradbury Rurik Bradbury

Apple will definitely move into streaming sooner or later — the purchase model alone will not work.
http://www.twitter.com/rurikbradbury Rurik Bradbury

The issue here is that it measures ‘units streamed’, not revenues or any financial indicator. And it compares cheap all-you-can eat content with premium pay-per-view options. Of course Netflix streams more units, but consumers pay more for the other providers — ie by market *value* Netflix has far less than 61%.
Anonymous

I think that’s the point: If it can have 60% with such a limited selection, imagine what it will have once it secures some better licensing deals (which is happening right now).

I’ve been a Netflix subscriber for years, but recently I greatly increased my Netflix viewing, because my new Blu-ray player has it built in. Netflix is one of the few companies out there that does nothing I don’t like. Sure, they could have a better streaming selection, but for $12 per month I couldn’t be happier with their service, features, and DVD delivery.
http://www.tnl.net Tristan Louis

Oh, don’t get me wrong. I’ve been a Netflix customer for years too and am very happy with their current offering but I suspect that every extra point beyond the 60% penetration they now have is going to be increasingly expensive. So the question is what happens if the Netflix competition brings its A game. Will Netflix stay at 60%, move up or move down. My bet is on the latter as time goes on as no one apart from Netflix has really been serious about streaming to non-computers to date. With Amazon throwing some selection of tilte with Prime, the sector could be heating up.
http://www.facebook.com/people/Tony-Mills/1099638671 Tony Mills

It really depends on Apples mindset. My guess would be if Apple really wanted to move into that field, they could buy Netflix, current MarketCap is about 10b.
http://www.twitter.com/rurikbradbury Rurik Bradbury

May be tough for antitrust reasons. The cable and phone companies would scream blue murder and throw every cent they have (a lot) into lobbying against it.

It would make terrific theater though.
Anonymous

Dude, digital is the only way to go. Seriously.

http://www.anon-tools.es.tc
Anonymous

I don’t know. Apple’s offerings are aimed at delivery to OS X and iOS devices primarily, with Apple TV a hoped-for growth area. Netflix is multi-platform in a way that Apple never will be, and I think that will prove to be key. Whether you want to buy a Samsung TV, a Roku set top box or a Panasonic Blu-Ray player, Netflix is available on all of them.
Anonymous

Yes, but whether that will cannibalize Netflix subscriptions as a whole is an open question. At best an Apple streaming offering will impact that subset of Netflix users who are also Apple TV owners; for everyone else (the vast majority at this point), Netflix’s support for a diverse array of methods to get your content on your TV will remain a deciding factor in its favor.

Unless sales of Apple TV explode or Apple comes up with some other way to get content onto the TV – and I don’t think the iPad HDMI cable is a winner, because it requires that you leave your iPad beside your TV… and get up every time you want to perform a control operation – I don’t see Apple as a significant obstacle to Netflix.

Plus, Apple doesn’t have to dominate *EVERY* arena. :-)
http://www.twitter.com/rurikbradbury Rurik Bradbury

True, but Netflix can’t dislodge the TV business status quo. The network/MSO cash pipeline has barely been disrupted — not at all compared to print media. Apple taking on the cable co.s would be the first tech player with significant leverage to do so (Google doesn’t count – it had minimal leverage).

Apple was kicking the tires by floating a ‘$30 subscription cable-killer’, but then it went quiet. I’m sure something is brewing. There’s only so long that the network/cable cartel can rip off consumers with unfriendly bundling, before the techies disrupt them.

Record labels used to sell albums full of junk, with a couple of good songs on. Look what iTunes did to that. I hope Apple can disrupt TV in the same way.
Anonymous

This was a very interesting analysis. Does the demand for box office top 10 or even top 100 fall off at a constant rate, or are there substantial variations per film? That is, does Netflix’s under-representation in top-10 selection over the past 6 years appear to materially hurt it in terms of number of streams and overall value proposition? I can imagine that much of that data isn’t public, but if you’re able to get your hands on it in any way it’d be valuable for determining whether negotiating top-tier releases is going to be a key point in Netflix’s success or failure going forward.
http://www.tnl.net Tristan Louis

Unfortunately, I can’t go back in time to get an idea of the data at the time (furthermore, Netflix streaming is less than 5 years old so the data can’t possibly exist). However, I have marked up my calendar to do the same analysis in 2012 with the 2011 data set and hopefully in subsequent years too so we’ll see….
Anonymous

And a fascinating new wrinkle is Netflix looking to become a content creator itself: http://www.nytimes.com/2011/03.....technology

Interesting times ahead!