Study: Netflix, Hulu Subscriber Sign-Ups to Decrease Throughout 2012/2013
April 5, 2012 1:37 PM
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Convergence Consulting Group expects a decrease in the number of customers signing up for Internet streaming services throughout 2012 and 2013 because of rising licensing costs
With the rising popularity of
video streaming services like Netflix
and Hulu, many believed that customers would say goodbye to traditional cable services and flock to more affordable internet-based alternatives. However, a new report says otherwise.
Convergence Consulting Group, a Canadian research firm, released a new report this week that shows a jump in video streaming popularity from 2008 to 2011, but predicts a decline in 2012 and 2013.
The report found that 2.65 million Americans left their cable TV providers for internet subscriptions between 2008 and 2011. Cable TV packages were just too expensive while internet subscription companies like Netflix offered low monthly prices for a variety of content that can be viewed on several different devices.
In 2011, only 112,000 U.S. citizens signed up for cable TV packages. This is a significant drop from 272,000 who signed up in 2010.
However, Convergence Consulting Group doesn't see this trend lasting. In fact, it expects a decrease in the number of customers signing up for internet streaming services throughout 2012 and 2013 because of rising licensing costs.
In 2010, Netflix had to pay $1.1 billion in streaming rights. In 2011,
this price jumped
dramatically to $3.9 billion. With rising costs, Netflix was forced to up its subscription prices from $9.99 a month for video streaming and DVD rental-by-mail to $15.98 for both, or $7.99 for video streaming or DVD rental-by-mail separately. This move angered customers to the point that Netflix was forced to lower its
Q3 2011 subscriber forecasts from 25 million to 24 million
. Other issues, such as limited streams and a DVD spinoff company called Qwikster (which was later killed off), caused customers to leave as well.
Convergence Consulting Group only sees streaming rights prices increasing annually from this point forward, and predicts that video streaming companies will have financial troubles ahead due to these price increases. In other words, the future of Netflix, Hulu and others is unclear for now, and high prices may lead to less relevant content, meaning fewer incentives for customers to join.
Last month, Netflix said it
planned to join forces with cable services
at some point in the future in order to compete with HBO Go, but Comcast later shot the video streaming service down, saying it had
no plans to offer Netflix on its Xfinity TV service
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Big Media doesn't get it
4/5/2012 8:22:17 PM
Big media can squeeze out Netflix with ridiculous licensing costs but I'm not going to return as a customer unless they significantly change their model.
Time Warner calls me all the time asking me if I want to add home phone and television service to my internet only plan. I always tell them I would be happy to if it's $20 a month no contract and I get HD service with an HD DVR. Unfortunately the best price I've ever been quoted was $45. Why would I ditch Netflix at $8/month for Time Warner at $45/month? Netflix could double their prices twice more and I STILL would not switch back.
"We can't expect users to use common sense. That would eliminate the need for all sorts of legislation, committees, oversight and lawyers." -- Christopher Jennings
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