Commentary

Netflix To Grow Fourfold From 2010 to 2020

by Jack Loechner , Staff Writer, March 5, 2015

According to new research from The Diffusion Group (TDG), Netflix streaming has increased 350% during the last 10 quarters, growing from two billion hours in Q4, 2011 to seven billion hours as of Q2 2014. Netflix 2014, Domestic Dominance, International Escalation, presents TDG’s latest analysis of Netflix and examines subscriber growth and hours streamed, and offers domestic forecasts for both through 2022. The report also discusses Netflix’s new frontier, international service introductions.

Total streaming among US Netflix subscribers rose from 1.8 billion hours in Q4-11 to 5.1 billion hours in Q2-14, almost tripling during this period. Total international streaming grew from 0.2 million hours in Q4-11 to 1.9 million hours in Q2-14, a ten-fold increase.

Netflix Hours Streamed Per Subscriber Per Month (Worldwide; TDG Estimates)
advertisement advertisement *Quarter*	*Monthly Hours Streamed*
Q4 2011	28.3 Hrs/Mo
Q4 2012	36.6
Q4 2013	43.1
Q2 2014	46.6
Source: Netflix/TDG, September 2014

Although the rate of international streaming growth has outpaced that of domestic streaming, US consumption remains responsible for the majority of total worldwide streaming hours. In Q3, 2011, domestic Netflix subscribers represented 94% of the worldwide total. In Q2, 2014 the US share of total worldwide subscribers declined to 72%, a trend expected to continue as Netflix executes its international expansion strategy.

Bill Niemeyer, TDG Senior Adviser, says “When Netflix first launched in 1998 as an innovative DVD-by-mail subscription… difficult to imagine that… would it pass HBO to become the largest premium TV/movie subscription in the US (and) would ramp up a formidable international streaming business… ”

Asked about how their streaming affects their typical viewing of an assortment of programs using their regular TV service (whether broadcast, cable, satellite, or other, Netflix users aged 13-54 said that it makes no difference to their viewing of new episodes of dramas (58%) and comedies or sitcoms (65%) on broadcast or cable TV networks. Respondents were slightly more likely to say that it has made them watch more rather than less of these types of programs.

There appears to be a net positive effect on viewing of each type of programming on broadcast or cable TV networks, notes Marketing Charts:

Reruns of episodes of comedies or sitcoms (28% watching more versus 22% watching less)
Reruns of episodes of dramas (27% more, 25% less)
Theatrical movies originally shown in theaters (26% more, 19% less)
New episodes of dramas (24% more, 18% less);
Original movies (22% more, 21% less)
New episodes of comedies or sitcoms (19% more; 16% less)

55% of broadband households now subscribe to an OTT service, according to new figures from Parks Associates, reports Marketing Charts. And, a recent forecast from Digital TV Research predicts that Netflix will surpass 100 million global subscribers by 2020, while a separate forecast covering 51 countries expects OTT revenues to grow from $4 billion in 2010 to $42.3 billion in 2020, with the US hanging on to its position as the leading market at the end of the forecast period with a 37% share.

For additional information, please visit TDG research here.

research, streaming, tv

8 comments about "Netflix To Grow Fourfold From 2010 to 2020".

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John Grono from GAP Research, March 6, 2015 at 6:44 a.m.
Just to add some perspective as to how big 7 billion hours of viewing per quarter is, that is marginally more (<1%) than Australia watches TV in a quarter. We have a population of 23 million or around 0.3% of the world's population.
Reply

Ed Papazian from Media Dynamics Inc, March 6, 2015 at 9:05 a.m.

I must say that I'm a bit surprised by the table in the report that traces the growth of streaming by Netflix subscribers. According to the table, a typical subscriber----I assume that this refers to the household-----streamed about 47 hours of content per month during the 2nd quarter of 2014, This translates to roughly 1.6 hours daily and, I would guess, to about .7-.9 hours per household member. If that is correct, Netflix's share of total viewing among residents of its subscriber homes is about 13-15%. Interesting.

Robert Dilworth from DILigent Marketing, March 6, 2015 at 1:06 p.m.

Clarification for the TDG researchers: When viewing grows from 2 billion to 7 billion, I think the increase is 250%, not 350%. Better yet, use a simpler concept for readers to understand: "Viewing more than tripled..."
@Ed - at 13% share, does this make Netflix the biggest network in the country?

Ed Papazian from Media Dynamics Inc, March 6, 2015 at 1:41 p.m.

Yes, Robert, it does----but only within its subscriber universe.

John Grono from GAP Research, March 6, 2015 at 4:05 p.m.

Ed, the 0.7-0,9 hours per person is roughly a programme per day ... feels OK to me. I think the big question is whether Netflix has already picked the low hanging fruit to get a 13 share. That is have they already got the devotees and future subscribers will be more pedestrian? I suspect the answer is probably, just like as we saw the early adopters of HDTV, PVRs, IPTV were heavier consumers. And yes I suppose they could claim #1 in their universe. But then so could (say) CBS in the universe of 'heavy CBS viewers' (or some similar cohort) ... all pretty meaningless.

Ed Papazian from Media Dynamics Inc, March 6, 2015 at 4:40 p.m.

Good point, John. It's a well known fact that people who have just recently gotten into something---in this case, Netflix----may, due to their initial enthusiasm, devote more time to it at the outset, but gradually reduce their consumption as time passes and the novelty wears off. I've always wondered how much Netflix program content will it take to sustain frequent user levels. However, to keep an open mind on this, perhaps someone at Netflix can tell us how much time its subscribers spend streaming its content by how long they have been subscribers. Are those that have been subscribers for, say, three years, now doing the same amount of streaming as those who signed up two years ago, last year and within the past three months, for example? Even better, can the demographic variable--especially household size---be held constant or "controlled---in such an a analysis as this might affect the outcome?

John Grono from GAP Research, March 6, 2015 at 5:10 p.m.

Ed, I was mulling over exactly the same thing regarding household size. The 'logical' assumption is that larger households view more so are more likely to consume Netflix. Netflix here in Australia is a different beast. It doesn't launch until later this month so its devotees use US accounts through a VPN with unofficial reports putting the number at around 200,000. My gut feeling is that their profile is of young adult single-persons and probably no TV but viewing via a laptop or tablet. So I'd love to see the US profile on household size, number of TVs, presence of children, other device ownership etc. as that is more likely to predict how Netflix will play out in Australia. We will start to pick them (local subscribers) up in our panels soon, but we still have the issue of referencing non-linear content in what is predominantly a linear/time-shift AMS.

Ed Papazian from Media Dynamics Inc, March 6, 2015 at 5:53 p.m.

John, the only thing I have seen recently is a Harris Poll finding from about two years ago that found a distinct younger adult age skew for Netflix users. In this poll, 43% of those aged 18-36 used Netflix compared to 31% for those aged 37-48, 28% for the 49-67 group and only 25% for those over 67 ( note the crazy age breaks ). This fits the classic profile for new electronic communications/entertainment services and tells me that Netflix, at the outset, probably was a mainly under 40, upscale service and that the middle aged group is now joining in while some of its original fans are aging and sticking with it. I have also read that women are much more into Netflix than men but have no hard data on that.