Netflix Streamers downgrade pay-TV services

According to The Diffusion Group’s (TDG’s) latest analysis of ‘Netflix Streamers’ – those who stream Netflix content to their net-connected devices – the inclination to downgrade pay-TV services has doubled in just the last 12 months.

In March 2011, TDG queried a random sample of adult broadband users that subscribe to cable, satellite, or telco TV service as to the likelihood they would downgrade their pay-TV service in the next six months – that is, “…move from a higher service tier to a lower one, or cancel a premium service of some kind.” In general, the percentage of Netflix Streamers to varying degrees likely to downgrade their pay-TV service increased from 16 per cent in 2010 to 32 per cent in 2011.

Though Netflix has gone to great lengths to reassure pay-TV operators that its offerings are additive to regular TV viewing and thus not a competitive threat, TDG research now suggests that the ‘Netflix Effect’ – that is, growing use of Netflix will lead to pay-TV service downgrades and even cancellation – is gaining momentum.

“Despite its rhetorical positioning, both Netflix and pay-TV operators have long been aware that there will come a point at which its services are not only dilutive to regular TV viewing, but antithetical to pay-TV subscription levels,” notes Michael Greeson, TDG founding partner and director of research. “The question for realistic observers has been not if this will occur but when. According to our latest research, that time is upon us.”

While research continues to suggest that such tendencies are due primarily to economic belt tightening, TDG discovered that the primary rationale varies by frequency of Netflix streaming. For example, close to half of all Netflix Streamers likely to downgrade their pay-TV service in the next six months cite “cost of service” and “the need to save money” as the primary reason for this disposition. Conversely, 34 per cent cite their growing use of online video as the culprit, two-thirds of which cite Netflix in particular as the primary perpetrator.

Among moderate and heavy Netflix Streamers likely to downgrade, however, 61 per cent cite growing use of online video as the primary reason for likely downgrade (two-thirds of which cite Netflix use in particular). Only 24 per cent of moderate and heavy Netflix Streamers cite economic concerns as their primary motivation for downgrade.

TDG’s latest report, Netflix Streamers, 2011, is a follow up to TDG’s 2010 profile, mining data from a March 2011 survey of 2,000 US adult broadband users on a variety of subjects related to quantum video consumption. The new report offers a year-over-year trending analysis, segments 2011 Streamers by frequency of services usage, and profiles these segments by key metrics including CE ownership, video viewing, and demographics.

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