Advanced Television

Study: Netflix does cannibalise pay VoD

June 20, 2012

Low cost and viewing flexibility give Netflix an advantage over pay-TV VoD and premium broadcast TV, according to a study from Parks Associates. ‘Choosing Content: Viewing Video’ found Netflix Watch Instantly rates higher in customer satisfaction than premium broadcast TV because of these factors. Netflix also topped pay-TV VoD in terms of cost.

“Consumers can pay for a month of Netflix for about the same amount as for two pay-TV VoD movies,” said Brett Sappington, Director, Research, Parks Associates. “Parks Associates research shows consumers know the quality of the OTT service is not comparable to pay-TV quality, but the cost-benefit comparison is enough to affect their purchase decisions.”

The Netflix OTT service also influences the decision processes of pay-TV consumers, raising the possibility of Watch Instantly cannibalising pay-TV offerings. Parks Associates research found 16 per cent of US broadband consumers, when watching movies on VoD, consider instead using an online subscription service as an alternative. Similarly, 17 per cent of those watching TV programmes on a premium channel like HBO consider using Netflix instead.

“Netflix is competitive against VoD and premium channels because it has a decisive edge in cost,” said John Barrett, Director, Consumer Analytics, Parks Associates. “Its greatest weakness is picture quality, but there are times when the consumer will sacrifice quality for other considerations. Pay-TV providers should emphasise their inherent advantages in content and picture quality but also need to develop alternative services that counter Netflix’s advantages in cost and flexibility.”

Pay-TV providers worldwide have adopted their own OTT services to combat independent services such as Netflix, but consumer awareness is low and few providers offer subscription OTT services. Comcast offers an OTT subscription service exclusively to its pay-TV subscribers, and DISH Network offers an online service to its subscribers via Blockbuster. Verizon and Redbox are partnering to offer an OTT service later this year.


Categories: Articles, Consumer Behaviour, OTT, Pay TV, Research, VOD