Netflix’s Usage Numbers Hit Milestone

by Jordan Richardson on July 5, 2012

There’s little doubting the fact that people’s viewing habits are changing. While it’s very, very premature (and somewhat sad) to suggest that the days of physical media are dead, it’s true that more people are turning in droves to the “instant” streaming of services like Netflix. This was made all the more apparent by the announcement that Netflix users streamed more than one billion hours of programming last month. That worked out to about 38 hours per subscriber.

Netflix CEO Reed Hastings made the announcement on Tuesday, following up an optimistic report by Citigroup that asserted the company’s market presence and reliability. As a result of the pat on the back, Netflix saw its stock go up by more than six percent in Tuesday trading. Fortunes have shifted somewhat from the era described in Matt Klassen’s “The End of the Netflix Honeymoon” from last October.

Stock prices are still struggling to recuperate value from the drop outlined in Klassen’s piece, however, and they are still a long way off from their mid-July 2011 peak of around $305. But the usage numbers are enormous and the global subscriber base sits at 26.5 million, a decent number when you consider that Comcast, America’s leading cable corporation, has 22.3 million television subscribers.

Netflix has been working to phase out its DVD delivery service for some time now. That has meant that the company has to spend more money on acquiring online content, as there’s simply no comparison when it comes to selection. Physical media is still more prevalent than its streaming counterpart and shifting absolutely everything into an online format could be quite a project. That explains why Netflix has thus far thrown tens of millions of dollars at the problem.

Obviously the cost of acquiring content is expected to set Netflix up on some pretty good footing in years to come. Shifting people to streaming video services saves them money over the long haul, theoretically, but the TV and movie studios are starting to catch on to the idea that advertising potential is vanishing. Because cable television continues to be a relatively lucrative avenue down which to find advertising potential, it’s probable that Netflix’s costs of acquiring current, decent content could rise significantly over the coming years. At that point, the thrilling $8 price tag could also rise.

As it stands now, people have started abandoning their cable TV packages in favour of online content from sources like Netflix and Hulu. This has left advertising potential in the lurch, of course. TV and movie studios won’t be taking it lying down, though, and we can probably look forward to an all-out content war in the coming years as companies start to sort out the value of viewers and advertisements in the changing media landscape.

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Written by: Jordan Richardson. www.digitcom.ca. Follow TheTelecomBlog.com by: RSSTwitterFacebook, or YouTube.

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