
7% of Americans Subscribe to Netflix, Now Larger than any Cable Company - mmcconnell1618
http://money.cnn.com/2011/04/25/technology/netflix_earnings/index.htm?source=cnn_bin&hpt=Sbin
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ShabbyDoo
The cable companies' competitive response to Netflix has been laughable
although no worse than any other established industry's response to
disruption. The service Netflix provided from the beginning is a wide
selection of content with little applied time on the customer's part. Going to
the video store, picking out titles, and remembering to return them was a huge
timesink. Netflix fixed that albeit at the expense of elapsed time. Then,
Netflix drastically cut the elapsed time with streaming content. That the
cable companies did next to nothing to combat this disruption is astounding
given that they already owned and controlled a pipe into the customer's house!

Imagine if, in 2002, the cable companies had come offered a little, Roku-esque
box which could hold two almost DVD-quality movies. A consumer would have
attached a Y-splitter in front of his existing cable box and then added this
new box in parallel. The box then would have connected to the TV's analog
inputs. One would have loaded up his box by going to the cable company's
website and picking movies from a large catalog -- one movie for slot "A" and
another for slot "B". Each slot would have taken 8 hours to download over the
cable line and then could have been watched using a minimalist remote to
pause, rewind, etc. -- just like a VCR. Consumers could have gone to their
local cable company office and picked up this box along with unlimited movie
service for, say, $20/month.

I've purposefully suggested the crappiest, most minimalist implementation I
could imagine as a thought experiment. Would this have been sufficient to
combat Netflix? Presuming identical catalogs, why would I fiddle with snail
mail, scratched-up DVDs, etc.? Such an offering certainly would have created
an uphill battle for Netflix.

It is not as if video-on-demand services had not been discussed since at least
the early 90s. What I have proposed is worse than what was suggested even back
then, right? So, why didn't the cable operators do anything? I'm bet it had to
do with fear of cannibalizing existing revenue streams. Why pay for HBO (sans
original content of course) if you could pick ANY movie? How many industries
have hurt themselves by not cannibalizing their existing revenue streams with
sufficient aggressiveness?

~~~
jsz0
Some of the IP video solutions coming out from the bigger cable companies are
actually pretty good though facing some limited content at the moment. I don't
think they can compete against Netflix for movies but as basically cable TV on
your computer/phone/tablet it's a pretty good start. In the long term it will
probably depend a lot on how people prefer to watch video. Traditional linear
programming or on-demand -- though they do integrate with DVR functionality so
you still get the on-demand angle to a large degree. Since they've already got
people on the hook for cable Internet and most people will want to continue
having some level of video service if not for sports/live events alone, I
think they're in pretty good shape to compete against Netflix, Hulu, Amazon,
etc. The missing piece is still a good set top experience. The vintage late
90's Cisco/Motorola boxes are so antiquated it's amazing. A smartphone I would
throw into a trashcan has more power and a better UI.

~~~
americandesi333
I would completely agree with you on the Set Top comment. Infact, do you even
need a set-top box? I know TV manufacturers are now building units that are
capable on connecting straight to the internet or have built in set-top box
capabilities. Set-top boxes will not be needed in the future.

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portman
Correction: now larger than any cable company was _last year_.

The latest subscriber numbers from Comcast [1] are from September 2010, for Q3
2010, when they reported 22.937M cable video subscribers.

It's conceivable that Comcast has been growing as well and has as many subs as
Netflix.

But the media loves a horse race!

[1] <http://www.cmcsk.com/releasedetail.cfm?ReleaseID=523403>

~~~
InclinedPlane
Comcast's subscriber base has been relatively stagnant, they've had circa 23
million subscribers since for the last half-decade. Netflix has been growing
at 10-15% per year for the last several years. Netflix is still vastly under
appreciated as a major player in media distribution, and has only started to
gain more attention lately. The fact that they will likely continue to grow
larger than any single cable company is significant.

~~~
portman
You're right.

Their _Internet_ subs are seeing 10% Y/Y growth, but their _video_ subs are
flat.

Looking at the last 3 years, it's unlikely that Comcast will report any major
uptick in video subscribers during their next earnings.

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ronnier
Even a strong reason for cable companies such as Comcast to enforce their 250
Gb monthly transfer limit.

~~~
ams6110
If "traditional" cable TV is to survive they are going to have to offer a-la
carte channel choice. I'd pay $5-10/month per channel for the handful of
channels that carry interesting content. I refuse to pay $100/month for the
90% of channels that are pure crap.

~~~
riobard
I'm not trying to defend the cable company (hate them anyway), but I just want
to point out one potential problem with the thinking: it's very likely that
the 10% of channels that you are interested is in the 90% of those that others
think are pure crap. The original idea to charge a lump-sum subscription fee
instead of a-la carte is precisely to combat this trap. Otherwise, many niche
programs will not be available in the beginning.

~~~
chopsueyar
That makes no sense. A television network's survival depends on the ability of
non-competing tv networks to subsidize its existence?

Also, the major channels are probably available for free over the air in HD!

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bambax
> _7% of Americans Subscribe to Netflix..._

I subscribe to Netflix (streaming only, obviously), am not American and not
located in America; they do check the IP but not as aggressively as Hulu, so
if you use a proxy they don't seem to mind.

I wonder how many of us there are?

~~~
heyitsnick
What do you mean by 'aggressively'? I've connected to hulu through a big-brand
VPN provider and had no issues yet; are they actively trying to block this?

~~~
bambax
Which brand? Hulu blocks Witopia for example, and all of EC2.

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rickdale
I dream of a day when I can turn on my television or whatever, select a
season, select an episode and boom I am watching the show. For me, OnDemand is
miniature to what it could be. I have more shows on my HD than any cable
company would offer onDemand. I will say Netflix has a lot of content, but in
terms of actually enjoying a movie you find on netflix, imho the movie will be
B grade at best.

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ck2
I am sure the cable companies will be lobbying congress soon to get laws
against netflix or allow them to throttle/charge them.

It's far too good to last. I really hope I am completely wrong.

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karolisd
Is there a Netflix competitor? Is there room for another Netflix?

~~~
AdamTReineke
Digital delivery: Amazon Video-On-Demand, Hulu, iTunes, etc.

Physical rental: Redbox, Blockbuster, etc.

Netflix does their job very, VERY well, making it hard for any new players to
enter the market.

~~~
smackfu
But stuff like Hulu and Crackle shows how easy it is for the the content
providers to start their own service and block Netflix from the content
entirely.

~~~
roc
Hulu also shows how hard it is for content creators to capture customers with
a new business designed primarily to protect their existing business.

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codex
How does the number of subscribers to Netflix compare to the number of
subscribers to _all_ cable companies? In most areas, cable companies have a
local monopoly, and so they tend to not go national for antitrust reasons.

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clistctrl
I'm actually surprised... I thought the number would be far larger than 7%

~~~
AdamTReineke
115.9m households have TVs[1], so 23.6m accounts is just over 20% of
households with TVs subscribing. That seems more reasonable. The 7% figure
assumes 1 account per person.

[1] -
[http://blog.nielsen.com/nielsenwire/media_entertainment/numb...](http://blog.nielsen.com/nielsenwire/media_entertainment/number-
of-u-s-tv-households-climbs-by-one-million-for-2010-11-tv-season/)

~~~
blhack
You're assuming that people without televisions don't have netflix. I use
netflix on my laptop.

~~~
waterlesscloud
I haven't owned a tv for several years now. If it's not streaming, I just
don't see it. I do fine.

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chopsueyar
Die Comcast, die!

~~~
kenjackson
Why? I know hating Comcast is popular, but I've actually found them to be
quite good, although expensive.

With Comcsst I get a lot of HD channels. I get a dual tuner DVR w/ no upfront
fees or commitment, just a rental fee. They have a pretty good sized on demand
package, with the ability to continue watching content from any TV in the
house. They've recently added the ability to control my DVR over the web.

Comcast at the half the price is a pretty good service, IMO. I certainly
wouldn't want them to die, as I currently have no other service giving me 4 HD
ESPNs, Big 10 sports, HD Nick, HD Nick Jr, HD Sprout, and HD on demand for
many network shows I watch.

~~~
chopsueyar
I have Comcast for both business (at 2 locations) and for personal home use.

To clarify, I only use Comcast for data, and I am reticent to call it an
Internet Service Provider.

Their business class service becomes saturated at the same time each day. They
cannot guarantee any upload capacity. Clients are very hesistant to pay your
hourly rate onsite while you wait for the Comcast guy to show up, so you can
tell him to check the signal at the tap and run a new drop and new ground
block and check every coax connection and splice (which should have been done
during the original install).

I do not watch ESPN or Nickelodeon, but you could probably spend less using
medication to zombify yourself.

Also, I was at a friend's house this Easter and was watching some Comcast
using their DVR channel guide, and guess what? The channel guide now has
banner ads on each page of the channel listings.

You pay to rent a DVR that has banner ads? WTF?

Is this what Stockholm Syndrome looks like?
<http://en.wikipedia.org/wiki/Stockholm_syndrome>

~~~
fragmede
Not to mention the set-top-boxes also show all the premium channels, and not
just channels you pay for. They're shooting for the up-sell (or their backend
is just that antiquated), but it's clear there exists a conflict of interest
that _won't_ result in better boxes from your cable-tv provider.

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rickdale
Netflix is terrible. You spend more time looking for stuff to watch than
actually watching stuff. I know a movie is bad if it's available for streaming
on netflix.

~~~
dminor
The most interesting thing about your comment is you consider Netflix a
streaming-only service. Kudos to Netflix for being ahead of the curve here,
despite the fact that streaming is much harder to implement and probably less
profitable than their core DVD rental business.

~~~
kenjackson
Actually their core DVD is less profitable. It costs them something like $1 to
send you a DVD, and a nickel to stream you a movie.

Notice that the Netflix site actually hides their premium packages (3+ disks
at a time). People who aggressively watch and return DVDs to Netflix probably
cost the company money.

~~~
chopsueyar
Are they getting special EC2 negotiated rates? A two hour movie streamed to me
costs 5 cents in computing power and bandwidth AND Amazon is still making a
profit?

[UPDATE] <http://aws.amazon.com/ec2/#pricing>

This says 8 cents per GB data transfer out.

~~~
brown9-2
Streaming is not hosted on Amazon, it's CDN based.
<http://qcontokyo.com/pdf/adriancockroft.pdf> Slide 20ish

~~~
chopsueyar
From your slide set, page 21 says Amazon receives a master tape from the
studio then converts it to a high-quality format on s3, then stores in 50
different formats and pushes those to the CDN. The more times someone stream a
specific movie, the more these "fixed" costs are recovered.

According to the chart you referenced, the CDN is still a part of the Amazon
ecosystem.

Amazon Cloudfront is 3 cents a Gigabyte (once you're over 1000tb)

