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Netflix Streaming Isn’t Slowing Down

10/31/2011 12:01 AM Eastern

Netflix hit a rough patch with record
customer defections in the third quarter, but its members
continue to stream more video than ever — with
the company alone now accounting for 32.7% of peak
downstream traffic in the U.S., according to a new study
from bandwidth-management vendor Sandvine.

Among fixed networks in the U.S., streaming video is
the primary driver of network-capacity requirements,
representing 60% of peak downstream traffic, up from
50% in 2010. Netflix a year ago accounted for 20% of peak
bandwidth consumption in the U.S., according to Sandvine’s
fall 2010 study. Peak network demand occurs between
7 p.m. and 9 p.m. local time.

In this fall’s Sandvine study, YouTube videos generated
11.3% of peak downstream traffic. That’s even as the
majority of broadband users (83%) use YouTube compared
with 20% who use Netflix.

Netflix last week said it lost 800,000 U.S. subscribers
in the third quarter — more than anticipated — following
a change in plan pricing that raised prices for
many members by 60%. As of the end of September, the
company had 21.45 million streaming and 13.93 million
DVD subscribers domestically, with a total of 23.79
million unique customer accounts.

“Our primary issue is many of our long-term members
felt shocked by the pricing changes, and more of
them have expressed that by cancelling Netflix than
we expected,” Netflix CEO Reed Hastings and chief financial officer David Wells wrote in a letter to shareholders.

Netflix expects fourth-quarter streaming-only customers
in the U.S. to be flat or down by as many as 1.5
million subs.

Still, Netflix retains a large piece of the streamingvideo
pie, and with so many Netflix-capable devices in
the market, “it’s hard to envision a scenario in which
absolute levels of Netflix [usage] will decline,” Sandvine
said in the study. As such, most real-time Internet
video now goes to non-PC devices, according to the

About 55% of streaming video traffic by volume over
North American fixed networks is destined for game
consoles, set-top
boxes, broadbandconnected
TVs and
mobile devices being
used in the home,
with only 45% going
to desktop and laptop

The problem with
adaptive bit-rate video
is that even when
network capac ity
is increased, the
stream “simply upshifts
to a higher fidelity
and fills the
new capacity,” Sandvine
CEO Dave Caputo
said. “The ‘build it
and they will come’
mentality falls short
of object ives” in
terms of meeting future

Sandvine’s study is
based on anonymous
in for the month of
September aggregated
from more than
200 service provider
customers in 85

For mobile networks,
video is also
a major driver, representing
32.6% of
peak downstream
traffic in North
America and 41.8%
in the Asia-Pacific
region. The largest contributor is YouTube. Traffic generated by mobile apps marketplaces account
for 5.8% of peak downstream usage in North America
and 9.4% in Asia-Pacific.

Among Netflix users, 77% of time spent watching
video is via a TV-connected device, while 20% is on a
PC and 3% is on a mobile device, according to Sandvine.
YouTube usage is predominantly on computers,
with 83% of time spent viewing on PCs, followed by
10% on mobile devices and 7% on connected TVs.