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Study Analyzes Why Netflix Instant Streaming Is Taking Off

Why is the Netflix Watch Instantly Service taking off when other over-the-top (OTT) video delivery services are languishing? The short answer: Because Netflix makes it easy to watch content on both the PC and the TV, according to a new study from The Diffusion Group (TDG).

Michael Greeson, founding partner for the new media research firm, didn't initially set out to answer that question—he was conducting a larger study on TV everywhere services—but the data he found on Netflix users was so compelling, that he decided to spin it off as its own report.

"Streaming is one thing, but streaming to the TV is a whole different equation," Greeson says. "Those that do this are the bleeding edge of video consumers. They constitute the early over-the-top crowd, but people know very little about who this demographic is."

What first caught his attention is how many Netflix subscribers use the Watch Instantly service. Nearly two-thirds of Netflix members with broadband connectivity use the instant streaming option, either on their computer or television. Also impressive is that half of the Watch Instantly users stream video to their TVs. In the world of set-top boxes (also known as over-the-top streaming video devices or broadband-enabled devices) getting people to bring the experience to their television is a major hurdle. While it gets a lot of attention, few people are actually doing it. Netflix began streaming to the TV via the Roku box, and since has added both the Microsoft Xbox 360 and Sony PlayStation 3.

Netflix's "Watch Instantly" page, where customers can select content to watch online or via set-top devices.

The study, "Profiling Netflix Streamers—A Consumer Snapshot," looks at how Netflix first attracted a crowd of early adopters willing to experiment with new delivery methods thanks to its DVD-by-mail service. Greeson's study also looks at how this crowd, and Netflix's streaming service, is likely to shake up the home entertainment industry.

There's a belief that this crowd is made up of "cord-cutters," Greeson explains, meaning people who want to stop their pay TV subscriptions in favor of online content. He doesn't think that's the case, at least not yet. For now, they seem content to enjoy both cable or satellite TV as well as unlimited streaming with Netflix. Where Netflix is shaking things up, however, is with the video-on-demand services, like pay-per-view: PPV downloads just aren't that attractive to people getting free unlimited online streaming with their Netflix subscription.

"That's where the real immediate threat of these over-the-top services is, " says Greeson.

The study, which was done without any cooperation or input from Netflix, also looked at how the company could improve revenue with new streaming services. It found that 37 percent of users would pay extra for the streaming service they were currently getting, 59 percent would pay more for access to new releases, and only 24 percent would pay extra for mobile access. That's the direction Netflix seems to be moving, Greeson says, with tiered streaming services that deliver different content.

The real lesson of the report is that taking risks with online content can pay off. "Don't be afraid of getting your content online and streaming it to the television," Greeson says. "Don't be afraid of the over-the-top model. Learn how to master it." The current shift in video viewing is only a threat to companies that are standing still, he says.

"If they're not leaders, like Netflix, they should at least be paying attention," he adds.

The full report, "Profiling Netflix Streamers—A Consumer Snapshot," can be ordered from TDG for $2,500.

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