No wonder everybody's gunning for Netflix. The video-streaming service is more popular than many of us imagined. A new study by market research firm The NPD Group shows that Netflix's share of streamed or downloaded digital movies was a competition-crushing 61 percent between January and February 2011.
Yes, Netflix streams 6 out of every 10 digital movies. And its competitors? Comcast is a distant second with a tiny 8 percent of the market. The rest of the also-rans include Apple, DirecTV, and Time Warner, all tied for third at 4 percent.
It's no secret that home Internet providers don't care for Netflix's popular all-you-can-stream video service. AT&T, Comcast, Time Warner, and the rest of the ISP posse feel that Netflix is getting a free ride on their data networks. An October 2010 report by Canadian broadband equipment supplier Sandvine didn't help matters much when it stated that Netflix streaming accounts for more than 20 percent of downstream traffic during peak hours, and is most active between 8 to 10 p.m.
Adding insult to injury is the fact that Netflix' 20 million or so subscribers are less likely to rent movies and TV shows from the cable and satellite guys' on-demand services. Ouch.
Revenge of the ISP
ISPs are fighting back with data caps, which will no doubt impact even moderate Netflix users. Beginning in May, AT&T's DSL and U-Verse customers will have monthly data caps of 150GB and 250GB, respectively. Time Warner has launched trial programs with data caps and overage fees in some markets, but public outcry has caused it to put usage-based pricing on hold, at least for now. Comcast caps monthly data usage at 250GB.
AT&T says its average DSL subscriber uses only 18 GB per month, and that only 2 percent of its customers will hit the data cap. But as I wrote nearly a year ago, soon we'll all be data hogs. That 2-percent figure will almost certainly rise video streaming becomes even more mainstream.
A high-definition Netflix video stream uses about 2GB of data per hour, according to company spokesman Steve Swasey. If you're an AT&T DSL customer who watches one 2-hour HD movie on Netflix every night, you're already at 120GB a month, which leaves 30GB for the rest of your online activities.
Is AT&T's data-cap argument disingenuous? A convenient way to strike back at Netflix? I believe it is, and that the fight has just begun.