Netflix's streaming movie service may be more popular—and perhaps more vulnerable—than anyone has realized.
Two-thirds of Netflix customers have used the service's "Watch Instantly" feature, according to new research by Praxi Group and One Touch Intelligence. Netflix's core business—DVDs by mail—is about as future-forward as blood-letting, and it hasn't stopped average users from embracing the service's more high-tech streaming format, even though it lags behind some competitors' technically by relying on Silverlight instead of Flash. Fifty-four percent of respondents said they watch at least one movie or TV show via Netflix streaming per month, and 20% watch eight or more.
Perhaps the most interesting finding is that despite Netflix's integration push—the service appears on Microsoft's Xbox, the Roku and Vudu set-top boxes, various Blu-ray players, the Sony PS3, and soon the Wii—over 60% of streaming movie watching is still done on a computer. Only 13% of respondents said they connect that computer to a TV. And it's not because they want to—it's because TV-connected streaming is still too complicated.
While the researchers take these and other numbers to be a sign of Netflix's success, there's more to be said about the gaping hole for competition that the service has left open. In interviews, survey respondents complained that the Watch Instantly catalog is vastly inferior to the DVD catalog, despite the fact that Watch Instantly is a much more desirable service. They also said they were still more attached to their cable/satellite TV service than they were to Netflix, leaving room for TV providers to step in with a competing streaming service and edge Netflix out of homes.
Services like Epix could be poised to do just that. Epix is a cable channel with a streaming online companion service that looks to subsume both TV and computer-based movie-watching into one subscription. If Epix or similar competitors find an audience, Netflix could find itself vulnerable to services that are more aggressive about beefing up their streaming libraries with new and popular titles. The company could also suffer if a competitor figures out a less expensive way of providing streaming movies direct to a television. Though right now NFLX leads the pack in TV connectivity, it wouldn't be hard for a service like Hulu to unseat them with a simpler, cheaper set-top box or big OEM TV deal.
Still, Netflix has an absolutely massive user base and plenty of cash, while startups like Hulu and Epix are still in their incipience. Once Netflix decides to start emphasizing its streaming service, it can take the money it saves on postage and pump it into licensing fees for more and better streaming content. It may simply be waiting for Netflix-connected TVs and consoles to proliferate before it plunges into a Watch Instantly revamp and blows its fledgling competition out of the water.
Read on to view the study in its entirety: