Report: Netflix Watch Instantly Cannibalizes Pay-TV VOD & Premium Channels

DALLAS: A new study from Parks Associates finds that Netflix Watch Instantly rates higher in consumer satisfaction than premium broadcast TV because of the lower costs and viewing flexibility.

The report, Choosing Content: Viewing Video, also finds that Netflix topped pay-TV VOD in terms of cost. The Netflix OTT service also influences the decision process of pay-TV customers, raising the possibility of Watch Instantly cannibalizing pay-TV offerings. Parks’ research shows that 16 percent of U.S. broadband consumers, when watching movies on VOD, consider using an online subscription service instead as an alternative. Also, 17 percent of those watching TV programs on a premium channel consider using Netflix instead.

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

"Netflix is competitive against VOD and premium channels because it has a decisive edge in cost," added John Barrett, the 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 need to develop alternative services that counter Netflix’s advantages in cost and flexibility."