Netflix May Be Eating Into VOD, Premium Networks: Study

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With its low $8 monthly price, Netflix's Internet streaming service may be eroding usage of movies purchased through video-on-demand and time spent watching premium channels like HBO, according to a study by Parks Associates.

About 16% of U.S. broadband consumers who watch VOD and 17% of those who subscribe to premium programming consider using an online subscription service like Netflix as an alternative, the research firm found.

Netflix streaming users rated the service higher than VOD and premium programming options based on price, although they rated Netflix's picture and sound quality substantially lower.

"Consumers can pay for a month of Netflix for about the same amount as for two pay-TV VOD movies," Parks Associates director of research Brett Sappington said in announcing the study. "Parks Associates research shows consumers know the quality of the [over-the-top] service is not comparable to pay-TV quality, but the cost-benefit comparison is enough to affect their purchase decisions."

In the first three months of 2012, Netflix added 1.7 million streaming-only video subscribers in the U.S. to reach 23.4 million total streaming members domestically, but it also lost 1.1 million DVD customers.

Netflix's streaming-video traffic over wireline broadband networks in North America represented about 33% of all peak-hour downstream bandwidth, after climbing 30% in the prior six months, according to a study by bandwidth-management vendor Sandvine issued in April.