Netflix Drives Web-Connected TV Viewing, But Growth Opportunites May Slow: Study

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Web-Connected TVs In 49% Of U.S. Homes

A study shows the technology continues to gain ground in the U.S. But adoption curves always flatten, which means companies like Neflix will have to seek other ways to grow. Deadline's David Lieberman explains.

There’s encouraging and discouraging news for just about everybody in the TV ecosystem from Leichtman Research Group’s latest study of emerging video services. The survey of 1,211 households shows that nearly half (49%) have a Web-connected TV, up from 44% last year and 38% in 2012. And people are using the capability. Some 24% of adults watch an Internet-delivered video on their TV at least once a week, up from 17% in 2013 and 13% two years ago. The changes were “spurred by Netflix’s decision in the third quarter of 2011 to focus on streaming video, coupled with the proliferation of connected TV devices, smartphones, and iPads and tablets,” says principal analyst Bruce Leichtman.

That’s a problem for pay TV companies. Netflix’ popularity is growing among non-subscribers — including cord cutters. About half (48%) of people who don’t pay for cable or satellite TV do take Netflix, a leap from 29% in 2012. On the flip side, the percentage of Netflix subs who also buy cable or satellite service fell to 80% from 85% in 2012 and 88% in 2010. 

Yet the data also point to potential challenges for Netflix. About 80% of its 35M domestic streaming users watch on a connected TV set — a percentage that has held steady for years. That’s fine as long as there’s been growth in the number of homes with smart TVs, or with sets connected via dedicated streaming devices (e.g. Apple TV, Roku, or Google’s Chromecast), game consoles, or blu-ray players. But adoption curves flatten over time, which suggests that growth in the number of Web-connected sets likely will slow. That means “the road for Netflix is thinning,” Leichtman says. “That’s why they want to find an off ramp” — for example by finding cable companies willing to offer Netflix on their set top boxes. One other finding also may interest Netflix followers: About 15% of its customers say that they share their subscriptions with others outside their households.

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