NETFLIX Leads the Pack, and Possibly the Future

Back in January, 2013, the future of Netflix was less than certain. Coming out of the Quikster misstep, and with increasing competition from the launch of rival services such as Amazon Prime Instant Video and Hulu Plus, not everyone was optimistic about the path forward for the nation’s biggest and best-known streaming service. Even I, longstanding subscriber since August, 2000, was a “glass half empty” kinda guy when it came to prognosticating the future of Netflix.

Convenience and superior selection may help Netflix hold off competitors...for now.

Offering audiences content they desire, when and how they desire it; it’s a successful growth strategy.

How wrong was I (and many others)? Very, as it turns out. Some figures recently published by Home Media Magazine:

Netflix this spring grew its downstream bandwidth market share by 2% to 36.5%, and upped to 33.81% its aggregate peak streaming traffic on fixed line devices (i.e. televisions) compared with the second-half of 2014, according to new data from Sandvine. Both data points were records for Netflix.

The company is so far ahead, perennial rivals Prime Instant Video and Hulu Plus generated just 1.97% and 1.91% downstream traffic market share, respectively. Prime Instant Video was up a scant 0.06% from the previous period.

Other video services included YouTube at 15.56%, iTunes at 3.36% and Facebook at 2.65%. Sling TV, the over-the-top video service launched by Dish Network in February, accounted for less 1% of downstream traffic.

From a total number of subscribers, The Guardian notes that the race is a little more even,but Netflix still dominates:

Nielsen’s Total Audience Report, which was issued in March, found that two out of five American households subscribe to a streaming service. Netflix is in 36% of homes, Amazon Prime in 13% (and some of those people might just want the free shipping for dog food and books), and Hulu Plus in 6.5%. Compare that to cable television, which is dwindling but was in 84% of homes at the end of 2014. That’s more than 100 million cable subscriptions.

Valid, confirmed share numbers such as this aren’t always easy to come by, but a close reading of these data points underlines some of the trends and audience habits which we’ve been showcasing here on the Giant blog:

Over-the-Top Hasn’t Reached The Top — As a matter of fact, as evidenced by both the downstream bandwidth growth for Netflix alone (+2%) AND the continuing launch of new services by media entities ranging from HBO to CBS, Showtime to Dish Network, OTT is where market analysts and CEOs think the business is headed. The fact that Netflix’s growth domestically is nearly 40x that of its closest SVOD competitor, Amazon, only underscores the strength Big Red has in branding, market awareness and business momentum. Add to this the international expansion that Netflix is currently executing; subscriber growth abroad is expected to be VERY strong.What does Netflix’s continuing and growing success mean for their numerous competitors, trailing far behind them (today)?Giant Interactive VOD Delivery

  • There IS Room for Many Players — While the numbers do paint a picture that Netflix is dominating the future of streaming media, and consolidating its lead, there is still business opportunity, audience, and ROI for other services. The keys to success? Compete with Netflix where you must — get exclusive content, cater to niche audiences, and expand geographically. But sidestep where you can’t compete — don’t try to outspend them, opting with quality and stragetic alliances. Amazon is starting to do this (exclusive content) and Apple could be doing a much better job (strategic alliances).–
  • OTT is going mainstream. Audiences understand how streaming works technologically and also understand why it’s a good idea for them. Netflix is, dare I say, ‘training’ domestic and international audiences on the fundamentals of streaming, opening the door for
  • Opportunity still exists for niche channels — From Cinedigm’s Dove Channel to RLJ Entertainment’s Urban Movie Channel to AMC’s Shudder, there still exists opportunity for streaming services which can address, more directly, the particular interests of a particular audience. While becoming as big as Netflix may not be in the cards for, say Shudder, there’s still revenue and opportunity for savvy programmers. (See above re: exclusive content, niche audiences)

The market is still settling out, so we’ll continue to see a fair number of service launch announcements and market maneuverings in the next few years as audiences determine how to best meet their interests and content needs. Without question, Netflix will continue lead. The “iffy” times of 2013 are far in the rearview mirror. But challenges remain: How will today’s undisputed market leader stay relevant, maintain growth in territory and subscribers and fend off both established, well-financed competitors and new, specialized upstarts. I can’t wait to see.