People love video streaming services

By November 5, 2010 No Comments

Anyone in the UK will know about the popularity of the BBC’s iPlayer streaming service, and now data out from North America shows that consumers are taking to Netflix’s streaming movie service in the same way.  In North America Netflix accounts for 20% of downstream internet traffic at peak times and 10% of Canadian internet users visited the Netflix in the week after they launched their Canadian service on Sept 22nd, and those users are using twice as much bandwith as YouTube.

The good news for the media industry is that it looks like streaming movies is becoming more popular than downloading them illegally.  Bit Torrent only accounts for 8% of US internet traffic during peak hours (although I guess a lot of torrents are accessed outside of peak hours).

I’ve long argued that as soon as there is a convenient and reasonably priced alternative to peer to peer consumers will flock to it, and that streaming services have all the characteristics required to bring consumers back to the right side of the law – principally because they are quick and easy to use.  The instant access you get from streaming services trumps waiting around for P2P files to download (if they do).

The big question has been whether media streaming services will be able to operate profitably at a price point that is acceptable to the consumer.  The debates about ad funded models vs subscription services in music services (Spotify vs Napster/MOG) show how difficult this problem is.  The data from Netflix is encouraging though – theirs is a subscription service with no free element which implies that if they are generating 20% of US traffic (at peak times) they are making a lot in sales.  The question, of course, is whether they are making enough to cover their substantial outlay on digital streaming rights.