Netflix traffic, be it movies or TV shows streamed over the wires, now accounts for close to 30% of Net activity in U.S. homes in peak evening hours, according to a study by hardware/software net traffic experts Sandvine Inc.
In total, the "real time entertainment" share of Net traffic, which includes Netflix, takes up 49.2%--basically half of data flowing into homes. Web activity, presumably covering all other use cases including reading digital news sources or accessing social network resources, takes up less than 17%. We're imagining the remaining 50% is taken up by digital traffic of other types like playing online games, reading email, making Skype calls, illegal file-sharing and so on ... but the fact that a single provider has grabbed 30% of Net traffic is amazing. Around 25% of homes with a broadband connection subscribe to Netflix, but the traffic-heavy nature of the service explains its larger share of the Net traffic compared to low-data-burden uses like email.
First, it's a sign writ in letters large that Netflix has roared to success in the online movies and TV content game, and it explains why other providers like Google are scrabbling to offer competing services--before the market is entirely sewn up.
But that 49.2% is also a statistic that will grab the attention of the traditional TV networks themselves. It's up 60% from the same measure for 2009, and Sandvine predicts it'll rise to being 55% or 60% of all evening Net traffic by the end of 2011.
Long used to having a degree of monopoly over their client's entertainment viewing habits, the arrival of the Net began to change the situation. And now it looks like their entire business model is under threat: Netflix, by its very nature, is not a network-driven service, it's a user-driven one with content streamed on demand when users prefer to consume it. The fact that Sandvine's stats relate to "peak" hours is going to be a wake-up call for the existing TV industry--this is the time it expects the average consumer to be tucked up on a couch watching the 'tube to see their content, when they choose to transmit it, with ads that they're being paid handsomely to show. But if a significant percentage of homes are now viewing Netflix instead, then they're certainly not watching TV.
There's a wrinkle here, because unlike the notion of two or three family members gathered together watching TV, the fact that someone in the house is watching a Netflix show doesn't necessarily mean everybody is--the set-top box isn't the only solution, and while Mom and Pop watch TV downstairs it's possible Junior is in his room watching a show on Netflix on his iPad.
But we do know that iPad use is also encroaching on the peak evening time usually occupied for TV watching, meaning how consumers spend their evening gobbling up entertainment is radically changing. It seems now that Netflix is behind a lot of this change.
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