The Internet belongs to Netflix

The Internet belongs to Netflix

Summary: What's program is the single largest consumer of Internet bandwidth today in the U.S.? Believe it or not, it's Netflix.

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If I were to ask most people what single kind of program they thought used up the most Internet bandwidth, most of them would say, "Web browsing." Wrong. According to research by Sandvine, a broadband solution provider and analysis firm, the Web takes up only 24.3%. Someone who pays attention to the net might guess peer-to-peer (P2P) file sharing such as BitTorrent. Nope. P2P has actually declined in recent years. In 2010, it only takes up 13.2%. The winner, by a wide margin, is Real-Time Entertainment, aka video and music-streaming, which accounts for 45.7% of data. Number one with a bullet in this category is Netflix.

Netflix!? Yes, Netflix. To be exact, according to Sandvine, "20.6% of all peak period bytes downloaded on fixed access networks in North America are Netflix." That's one in five bytes devoted to streaming Star Trek or The Girl with the Dragon Tattoo. Who knew?

You may think of Netflix as that mail-order DVD business, but the company's growth as an Internet video-on-demand (VoD) service has been explosive. Now, if only the Internet can keep up with the demand.

I've said before that technically the biggest problem that Netflix, Hulu, and the other Internet video streaming sites is not enough Internet bandwidth to go around. I was right in thinking that the last mile is a real problem for Internet VoD. What I hadn't realized though that even before Roku, the new Apple TV, and Google TV have had a chance to really take off in the mass market that the demand for VoD was already so high. At this rate of growth, the Internet backbones will soon be creaking from overload as well.

In Canada, for example, where Netflix recently launched an online VoD service, Sandvine reports that at its peak, around 9:30 PM local time, Netflix takes up more than 95% of all bandwidth in use. Sandvine calls this "shocking levels of success," I can only agree.

This trend is only going to continue. Cable TV subscribers are dropping their TV packages for Internet video services like Hulu and Netflix. Why shouldn't they? With the exception of sports and local TV shows, you can get most of the same shows and movies you want from Internet TV for a tenth of the price of cable. And, I might add, this is before Hulu Plus, the Hulu subscription service that offers a much wider variety of TV shows, drops its monthly price to $4.95.

Besides creating a technical problem, there are business problems here as well. As Sandvine stated, "For service providers, this is a double-whammy: not only are they losing revenue to these over-the-top offerings, but they are losing network capacity delivering these services." So, even as customers want more bandwidth than ever, the cable ISPs have less of a financial reason to deliver it to them. This doesn't bode well for users.

At the same time, the content providers aren't happy about the way content is escaping from their traditional channels of over-the-air TV transmission, cable TV, and DVDs. Indeed, for at least a while the old big three TV networks, ABC, CBS, and NBC, were blocking their content from Google TV users. CBS and NBC seem to have backed off from their content blockade, but the issue of who pays for the content and how on the Internet remains.

Clearly both content providers and ISPs are still coming to terms with what they see as Internet VoD's shocking success. I'm not sure why they didn't see this coming, I did. Perhaps they believed, as Steve Jobs did once, that Internet TV was just a hobby. It's not anymore.

Topics: Hardware, Browser, Mobility

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7 comments
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  • Where are you getting your prices?

    Last time I looked, getting prime time shows from the Internet would cost me more at $0.89/0.99 each. And then if I dropped cable my Internet through FIOS would go up around $15/mo.

    Therefore any "savings" would be $0 or it would actually cost me $$.

    Downloading through Hulu is not an option as I don't do commercials thanks to the DVR. Getting through an hour show in 40 mins or an half hour show in 20 mins means I have more time.
    itguy08
    • RE: The Internet belongs to Netflix

      @itguy08 I'm currently paying my cable provider for an OK package and it's running me about $80. With Hulu Plus & Netflix, at currently prices, I'm under twenty bucks. For me, and most of the cable customers I know, Internet TV is a much better deal. Unless, you're a big sports guy, then it's not so hot, but that's a story for another day.

      Steven
      sjvn
  • All your movies are belong to us ...

    ... for consistency's sake then we can expect ISP's to begin blocking Netflix at peak time ... to let our bittorrent, er I meant Internet browsing traffic, enjoy its due latency and bandwidth ;-)

    Or maybe we should do a proper job: that is let Steve Jobs write a filter to make sure only decent material went downstream. So no naughty stuff ... and only Apple ads. I mean cutting out ads would ensure a big reduction in traffic ;-)
    jacksonjohn
    • RE: The Internet belongs to Netflix

      @johnfenjackson@...

      The question then becomes, if we cut out all the ads, then how do movie/TV studios make enough money to produce the shows? Through licensing and subscription fees only? There's a whole bunch of revenue in ads for both TV stations and the people who make the ads that would go up in smoke if all "TV" traffic moved to ad free web access.

      That is until they put more and more ads into streaming media, then you might as well go back to having the TV...
      Cyrorm
  • RE: The Internet belongs to Netflix

    In Canada, milk is sold in bags.
    ConceptVBS
  • And for those outside the USA

    For those outside the USA, this story is irrelevant.

    Personally, I find a huge amount of latency on DSL connections are down to web sites poorly aggregating feeds from Flashtalking.com (video adverts), google analytics (traffic/ad stuff) and other unwanted crap

    This clogs, or rather holds up because they are bollocks, web browsing up for me more than anyone streaming from Netflix, Hulu, BBC iPlayer, ILoveFilm, YouTube etc...
    neilpost
  • RE: The Internet belongs to Netflix

    Cable companies and TV networks had more opportunities to deliver their products and services over the Internet and didn't. Why can't I subscribe to Dish or DirectTV via the Internet instead of physical devices bolted to my roof and wired to my TV? Television should be streamed over the Internet as well as the airwaves, deliver the media to me in the best way for me, not the 1950's way...
    robertcarrico@...