Netflix Hurts Subscription TV

This should not come as much of a surprise, but The Diffusion Group (TDG) has done the legwork to back it up. People who stream video content from Netflix over the Internet are twice as likely to cut back on their cable or satellite service than they were a year ago. According to a company press release, 16% of online Netflix users in 2010 were inclined to change their subscription to a lower tier or cancel a premium service. That figure had jumped to 32% this year. And about half of them cite cost-savings as the main reason for making the change.

These results are interesting, because the party line at Netflix is that they are not out to compete with cable and satellite, but rather provide an adjunct service. They can call it whatever they want, but it’s clear that Netflix poses a significant threat to subscription revenues. If the subscription services can’t find a way to lower the costs for their customers — at a time when the networks want more money in retransmission and licensing fees — Netflix is going to steal the bacon right out from under their noses.