The Parks study found Netflix Watch Instantly rates higher in customer satisfaction than premium broadcast TV because of these factors. Netflix also topped pay-TV VoD in terms of cost."Consumers can pay for a month of Netflix for about the same amount as for two pay-TV VoD movies," says Brett Sappington, research director for Parks Associates. Consumers know Netflix quality doesn't match pay-TV quality, Sappington adds, "but the cost-benefit comparison is enough to affect their purchase decisions."
The Netflix over-the-top service also influences the decision processes of pay-TV consumers, raising the possibility of Watch Instantly cannibalizing pay-TV offerings. Parks Associates research found that 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 such as HBO consider using Netflix instead.
"Netflix is competitive against VoD and premium channels because it has a decisive edge in cost," says John Barrett, director of consumer analytics for 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."
Pay-TV providers worldwide have adopted their own OTT services to combat independent services such as Netflix, but consumer awareness of them is low and few providers offer subscription OTT services. Comcast offers an OTT 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.
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