Netflix cannibalising pay-TV VoD

MUMBAI: Low cost and viewing flexibility give over-the-top (OTT) service Netflix an advantage over pay-TV VoD and premium broadcast TV in the US, according to a new study from Parks Associates on consumer video viewing.

The study, ‘Choosing Content: Viewing Video‘, found Netflix Watch Instantly rate higher in customer satisfaction than premium broadcast TV. Netflix also topped pay-TV VOD in terms of cost.

Parks Associates director research Brett Sappington said, “Consumers can pay for a month of Netflix for about the same amount as for two pay-TV VOD movies. 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.”

Netflix also influences the decision processes of pay-TV consumers, raising the possibility of Watch Instantly cannibalizing pay-TV offerings. Parks Associates research found that 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 programs on a premium channel like HBO consider using Netflix instead.

Parks Associates director, consumer analytics John Barrett said, "Netflix is competitive against VOD and premium channels because it has a decisive edge in cost. Its greatest weakness is picture quality, but there are times when the consumer will sacrifice quality for other considerations. Pay-TV providers should emphasize 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 over-the-top service later this year.

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