Skip to main content

Netflix gaining in challenge to VOD and subscription TV

Lower cost and greater viewing flexibility is giving Netflix a competitive advantage over pay-TV video-on-demand and premium broadcast TV, finds a new study from Parks Associates.

A new study on video viewing, called Choosing Content: Viewing Video, has found that Netflix’s instant viewing convenience rates higher in customer satisfaction than premium broadcast TV because of both cost and flexibility. Netflix also bettered VOD on pay-TV systems in terms of cost.

“Consumers can pay for a month of Netflix for about the same amount as for two pay-TV VOD movies,” said Brett Sappington, director of research at Parks Associates.

The research showed that consumers know the quality of the Netflix service is not comparable to pay-TV quality, but the cost-benefit comparison is enough to affect their purchase decisions.

Netflix also influences the decision processes of pay-TV consumers, raising the possibility of instant viewing cannibalizing pay-TV offerings. Parks Associates research found 16 percent of U.S. broadband consumers, when watching movies on VOD, consider instead using an online subscription service as an alternative. Similarly, 17 percent of those watching TV programs on a premium channel like HBO consider using Netflix instead.

“Netflix is competitive against VOD and premium channels because it has a decisive edge in cost,” said John Barrett, director of consumer analytics at Parks Associates. “Its greatest weakness is picture quality, but there are times when the consumer will sacrifice quality for other considerations.

“Pay-TV providers should emphasize their inherent advantages in content and picture quality but also need to develop alternative services that counter Netflix’s advantages in cost and flexibility,” he said.

Pay-TV providers worldwide have adopted their own competitive services to challenge Netflix, but consumer awareness is low and few providers offer subscription services, the study said.

Comcast offers a subscription service exclusively to its pay-TV subscribers, and DISH Network offers an online service to its subscribers via Blockbuster. Verizon and Redbox are partnering to offer an over-the-top service later this year.