It’s not TV, it’s TCP/IP


A new study by Sandvine indicates that Netflix alone accounts for about 20% of prime-time bandwidth usage in the United States:

That’s just Netflix; all streaming media combined account for 43% of non-mobile Internet traffic. Considering the pushes being made by Hulu and (especially) ESPN, that stands to grow significantly, and it presents a tremendous wrinkle to two big issues on the landscape of corporate media: the decline of the mass television audience and the debate over net neutrality. On the former, the TV networks have suffered eroding viewership since the mass adoption of multi-channel subscription television services (i.e., cable) began in the early 80s. They’ve hedged their bets by investing heavily in niche cable channels (even if the niches are often not so niche, like SyFy and its wrestling shows) and now by launching streaming and download services, most notably Hulu. Apparently people are responding. The business model is still a little unclear, and will almost certainly involve the networks using Hulu to make a power play against Netflix, but Netflix has a huge member base to stand on, as well as relationships with movie studios that have much different incentive structures than its relationships with TV studios. Perhaps its something Netflix can leverage into becoming a less chaotic version of YouTube — subscription-based access to original, independent content that’s organized and reliable could be extremely attractive.

While its got one eye on the TV networks, Netflix also needs to watch out for Big Bandwidth. As long as net neutrality remains unassured — and there’s certainly no legislative guarantee coming any time soon — Netflix is in danger of being extorted for packet delivery. It’s not as big as YouTube (i.e., Google) or as well connected as Hulu (i.e., most of the big media corporations); it’s potentially right in the crosshairs for a neutrality challenge by any of the big cable providers who are also some of America’s biggest ISPs. Coincidentally, these are also some of the companies being affected most of the drop in TV viewership. I wonder what might happen if one of these companies — say, Comcast — were to try to buy one of the big TV networks — say, NBC Universal? That’s an organization that would have a lot of incentive to go after a company like Netflix, and at least two powerful positions from which to do so.

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