Netflix Users Buy Fewer Pay-TV Services

FRISCO, TX - Netflix customers are now twice as likely as they were a year ago to cut back on their use of pay-TV services, according to a new analysis from The Diffusion Group (TDG).

In March, TDG queried a random sample of adults who subscribe to both pay TV and broadband about whether they would move from a higher TV service tier to a lower one or cancel a premium service in the next six months. The percentage of Netflix streamers who expected to downgrade their pay-TV service increased from 16 percent in 2010 to 32 percent in 2011.

Though Netflix says its service doesn't cut into regular TV viewing and thus is not a competitive threat, TDG's research suggests that the use of Netflix will lead to pay-TV service downgrades and even cancellation.

"Despite its rhetorical positioning, both Netflix and pay-TV operators have long been aware that there will come a point at which its services are not only dilutive to regular TV viewing, but antithetical to pay-TV subscription levels," notes Michael Greeson, TDG founding partner and director of research. "The question for realistic observers has been not if this will occur but when. According to our latest research, that time is upon us."

The more that consumers use Netflix, the more likely they are to say it cuts into their pay-TV use. In general, about half of the Netflix streamers who say they are likely to downgrade their pay-TV service in the next six months cite "cost of service" and "the need to save money" as the primary reason, and only 34 percent cite online video (primarily Netflix) as the reason. But moderate and heavy Netflix streamers who plan to downgrade their pay-TV services are far more likely to blame Netflix. Sixty-one percent of these users cite their growing use of online video as the primary reason for cutting back on pay-TV, and only 24 percent cite economic concerns as their primary motivation for downgrading.