Netflix and the Rise of Online Video Streaming

Online Video Streaming

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In late 2011, Netflix took a drastic turn for the worse. Amidst changes in its pricing structure and plans to separate the DVD-by-mail arm, Netflix lost an estimated 800,000 subscribers in one quarter. The stock plummeted and the outlook was grim. Fast-forward to two years later and Netflix has regained its position as the king of online on-demand streaming. The number of subscribers increased by 5 million in 2012 , and just this month, the stock price reached an all-time high of $314.18. So what’s driving this growth and enabling Netflix to thrive?

All roads lead to content. From deals with Walt Disney Co. and DreamWorks Animation, to partnerships in the UK with Virgin Media, Netflix streaming and the content it delivers is reaching more audiences in new self-service ways. This February, Netflix launched its first original series, Emmy nominated “House of Cards,” and has since launched six additional series, with four more slated for 2014. In August, Kevin Spacey, the star of “House of Cards,” gave a passionate speech about the death of the cable television model, the future of content, and the role of Netflix in providing viewers a viewer-centric form of distribution.

In order to understand if Mr. Spacey is correct in his prediction—that more people will start viewing and consuming content in an online, a-la-carte form, I looked at the stream of visitors to Netflix.com and its competitors over the course of two years to see if this trend is imminent.

Comparing Netflix and other online video streaming sites

In comparing unique visitors (UVs), Netflix.com has continued to dominate the market with an average of 34.7 Million UVs per month. While other online sites have grown in the number of visitors, the month-to-month deviation is significantly lower for Hulu.com and Netflix.com, over network sites, meaning a stable growth trend for online on-demand content providers.

Unique Visitors Video Streaming Sites

Additionally, in measuring loyalty, visits to Netflix.com average 7.94 times per person, per month, double that of HBOgo.com. This figure has growth by 45% for Netflix.com over the last two years.

Visits per Person Video Streaming Sites

So with all the online visits and original content series Netflix is pumping out, has there been a sharp increase in engagement (i.e. average stay per visitor)?

Average Stay Video Streaming Sites

As it turns out, there hasn’t been. Overall, time spent on site has actually seen a slight decrease in the last two years. Reasons for this may include an increase in time spent on mobile and streaming devices (e.g. tablets, Roku, AppleTV) over the website, or possibly, an actual decrease in engagement with Netflix over all.

What is known is that neither the number of visitors nor the average stay has drastically increased over the last several months since Netflix introduced original content. While there has been a trend of steady growth, time on the site has actually decreased and the outlook is still unclear. There are many levers that will govern the depth of disruption in the cable television model. With the current data we do see disruption looming—but at what rate and impact is still to be defined.

About Alejandra Tejada:
Alejandra Tejada is a Senior Associate at Compete. She recently joined the company’s Media Practice after graduating with an MBA from IESE Business School in Barcelona. Alejandra’s previous experience is in international Microfinance. She is passionate about exploring business strategy and growth opportunities in Media and Technology. Connect with Alejandra on LinkedIn or follow her on Twitter.