Netflix Video Streaming Success Competes With Cable

By July 30, 2010

Netflix began as an online video rental service with rotating DVDs that came in the mail, but has become more profitable due to its success as an on-demand movie and TV show streaming service. Several sources were agog as the numb

ers were released - Netflix is spending large amounts on licensing content from copyright holders, but is still successful at maintaining a large profit. As tech blog WWWery reports, in the second quarter of 2009 "Netflix spent $9 million to get licenses for films and television shows for its online movie and video streaming service" and $66 million Q2 this year. Additionally, "over the last 6 months Netflix had paid $116 for streaming content, as to $31 million spent for the same last year."

Thought of as responsible for making brick-and-mortar movie rental houses such as Blockbuster obsolete, Netflix could be doing the same for cable television and pay-per-view. According to, Netflix's concentration on story-driven material could appeal to a certain category of consumer that does not care about the news, sports and other content that cable networks are heavily laden with.

This sort of material, focusing on newly released films and back episodes of TV shows, is demanding a higher premium from the company. CNET discussed today how Netflix does not even have to raise subscription fees to keep up with these price hikes. Fewer DVDs in postal circulation takes care of some of the cost, as does a higher subscriber base. But a large part is the substantial dropping in bandwidth prices even as Netflix demands more of it to keep up with the increasing numbers of PCs, game consoles and set-top boxes that are receiving the video streams.

Subscribers who watched at over fifteen minutes of streaming content in the second quarter grew 61 percent, up from 37 percent in the 2009 Q2. "From June 2009 to the same month this year, Netflix added nearly 5 million subscribers, a 42 percent increase. By the end of this year, the company says it could possess as many as 18.5 million subscribers." CNET predicts next year Netflix's subscriber numbers will equal Comcast's at twenty million.

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