Netflix Is Winning, but Who Is Losing?
This is Netflix's world and every other content distributor is simply streaming in it. Internet traffic tracker Sandvine is out with its semiannual report on streaming trends, and the leading service continues to pad its lead.
Netflix accounted for 34.2% of the Internet's peak downstream traffic during the first half of the year in North America, up from a still healthy 31.6% during the latter half of last year. Amazon.com's gaining ground with Prime Instant, but it still accounts for a meager 1.9% of downstream traffic. We'll see if the addition next month of several iconic HBO shows helps boost Amazon's fortunes.
Think about that for a moment. Netflix streaming is taking up more than a third of the country's downstream traffic during peak usage periods. Sandvine also points out that the top 15% of video users -- categorized as exhibiting "cord cutting" behavior for their dependency on streaming -- took in an average of 100 hours of Internet video a month. Let that marinate, too. We're talking about folks spending an average of more than three hours a day streaming video.
If Netflix and streaming video are gaining so much ground, who is losing? We know it's not Netflix. Despite accounting for less than 2% of peak downstream traffic it is actually gaining market share. Despite the 15% of the country consuming 54% of the total monthly network traffic, it's not as if those cord-cutters are leaving much of a mark. After a few years of declines we're seeing stability and even growth at some of the country's leading cable television providers.
It's not as if cable customers think that they're getting a good value. In another round of mind-blowing data last week, TV ratings tracker Nielsen revealed that the average U.S. home receives 189.1 channels but only watches 17.5 of those channels on average. We're watching just 9% of the channels that we're paying for, or -- put a more dramatic way -- we're paying for 91% of channels that we never watch.
But we can't introduce logic when data tells us otherwise. Comcast is coming off back-to-back sequential increases in video customers, and Time Warner Cable posted its smallest sequential decrease in five years.
So where are all of these hours that we're spending on Netflix coming from? Real-time viewing of broadcast TV is an easy target, but we can't ignore that video game sales have been slumping through most of the streaming video revolution. Even mobile gaming has come under fire lately with back-to-back quarters of sliding sequential bookings for niche juggernaut Candy Crush Saga.
In the end, Netflix's growth isn't coming at the lone expense of the pay-TV industry. The hours spent streaming today were the hours we spent playing games, reading books, or perhaps even surfing the Web in previous years. Netflix is throwing a bigger net than you think.
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The article Netflix Is Winning, but Who Is Losing? originally appeared on Fool.com.Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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