View Full Version : Will Netflix Destroy the Internet?

Doug Roemer
11-04-2010, 01:44 PM
The title of this slate.com article is alarmist, but I was intrigued by the following statement regarding Netflix dowloads overtaking Netflix DVD rentals:

" ... Netflix predicted that its shipments of DVDs would peak in 2013—after that, the number of discs it sends out will begin to decline."


On Sept. 22, Netflix began offering its streaming movie service in Canada. This was Netflix's first venture outside of the United States, and because the company wasn't offering its traditional DVD-by-mail plan to Canadians, its prospects seemed questionable. How many people would pay $7.99 per month (Canadian) for the chance to watch Superbad whenever they wanted?

A lot, it turns out. According to Sandvine, a network management company that studies Internet traffic patterns, 10 percent of Canadian Internet users visited Netflix.com in the week after the service launched. And they weren't just visiting—they were signing up and watching a lot of movies. Netflix videos quickly came to dominate broadband lines across Canada, with Netflix subscribers' bandwidth usage doubling that of YouTube users.

It's not just Canada. Netflix is swallowing America's bandwidth, too, and it probably won't be long before it comes for the rest of the world. That's one of the headlines from Sandvine's Fall 2010 Global Internet Phenomena Report, an exhaustive look at what people around the world are doing with their Internet lines. According to Sandvine, Netflix accounts for 20 percent of downstream Internet traffic during peak home Internet usage hours in North America. That's an amazing share—it beats that of YouTube, iTunes, Hulu, and, perhaps most tellingly, the peer-to-peer file-sharing protocol BitTorrent, which accounts for a mere 8 percent of bandwidth during peak hours. It wasn't long ago that pundits wondered if the movie industry would be sunk by the same problems that submarined the music industry a decade ago—would we all turn away from legal content in favor of downloading pirated movies and TV shows? Three or four years ago, as BitTorrent traffic surged, that seemed likely. Today, though, Netflix is far bigger than BitTorrent, and it seems sure to keep growing.

Sandvine has been publishing annual reports on broadband usage since 2002. When you study previous editions, you notice that Netflix's dominance over BitTorrent fits into a larger story about how our Internet use is changing. Over time, we've shifted away from "asynchronous" applications toward "real-time" apps. Every year, that is, we're using more of our bandwidth to download stuff we need right now, and less for stuff we need later. Sandvine's 2008 report (PDF) showed that all the applications that saw big increases in traffic were dependent on real-time access: online gaming, Internet telephone programs like Skype, instant messaging, Web video, and "placeshifting" devices like Slingbox that let you watch TV shows you record on the Internet. Peer-to-peer file-sharing is asynchronous; you spend hours downloading a movie or game that you'll watch or play later. In Sandvine's 2008 report, peer-to-peer use was essentially unchanged from the previous year. By 2009, peer-to-peer traffic had declined by 25 percent (PDF).
That makes sense—once we come to expect immediate access to videos, BitTorrent's download-now, watch-later model seems outdated. That's what happened for me. In a column last spring, I admitted my affection for illegally downloading movies and TV using BitTorrent. I had what I thought was a good excuse for going over to the dark side—there wasn't a good way to get movies and TV shows legally online. Yes, Netflix offered a streaming service called Watch Instantly, but I wrote that the company's streaming service "often feels like Settle-For Instantly, since many of the titles are of the airline-movie variety."

In the last 18 months, though, Netflix has gotten much better in two main ways. First, it signed deals with TV networks and movie distributors that let it add a lot more movies and shows. It certainly doesn't have everything—or even most things—that I want, but I rarely feel like I'm wasting my time watching garbage. Second, Netflix's streaming service is now available on a wide range of devices—you can watch with your computer, iPhone, iPad, Apple TV, Blu-ray and DVD players, Wii, PlayStation 3, Xbox, and a range of Web-connected TVs. This is one of my favorite things about Netflix: I can start a movie on my TV, watch a bit of it later on my PC, and then finish it on my iPad before bed. Every time I switch to a new device, the video starts right where I left off. No other movie-delivery system—not DVDs, not BitTorrent, not iTunes, not Hulu—allow for this kind of flexibility. And as long as Netflix keeps expanding its library and the number of devices you can get it on, I don't see how it can lose.

Well, maybe there is one dark cloud: Will there be enough available bandwidth for Netflix to keep growing? Wired.com's Ryan Singel points out that in the hours when Netflix hits 20 percent of broadband use, it's being used by just under 2 percent of Netflix subscribers. That stat has huge implications for how ISPs manage their lines. If 2 percent of Netflix customers account for one-fifth of the traffic on North American broadband lines, what will happen when more and more Netflixers begin to watch movies during peak times?

The outcome might actually not be that dire. Theoretically, broadband capacity isn't fixed—as people begin using bandwidth-hogging services like Netflix more often, they'll subscribe to faster Internet lines, and that will push ISPs to build out their capacity. Still, as I've pointed out in the past, American broadband is pretty crummy. Unlike in other countries, our Internet plans haven't been getting faster, cheaper, and more widespread. In a presentation that it published online earlier this year, Netflix predicted that its shipments of DVDs would peak in 2013—after that, the number of discs it sends out will begin to decline. The future of Netflix, then, is the Internet. It's an open question whether the Internet can keep up.

Correction, Nov. 3, 2010: An earlier version of this article erroneously claimed that Netflix accounted for 90 percent of traffic on one Canadian broadband network. While Sandvine's report did indicate a substantial increase in Netflix traffic on the Candian Internet, it did not reach 90 percent. (Return to the corrected sentence.) This article also erroneously stated that at peak hours Netflix accounts for one-fifth of North American broadband capacity. It accounts for one-fifth of all traffic, not of all available bandwidth.

Steve R
11-04-2010, 02:03 PM
I can't even download the article that says downloads will take over the internets...

It was taking too long. So I stopped and apparently saved the internet.
Can we have our avatars back now?

mark t
11-04-2010, 02:06 PM
No. Avatars kill the internet.

John W.
11-04-2010, 06:30 PM
Just yesterday as I was putting a Netflix disc back in its envelope I thought about how old-fashioned this was going to seem in a few years. It seems old-fashioned now actually as streaming Netflix through the Wii is how I've been watching most movies lately. A couple of drawbacks: not having DVD extras available, and the "retrieving" time (I'm guessing due to peak hours). I treat the delays as I would commercial breaks, but it's annoying, especially if it keeps happening. Seems it could be our internet speed? Anyway, the times they are a changin'. And Netflix will save a ton of money on postage when everyone is streaming movies.

Gary Banks
11-04-2010, 07:51 PM
I'm killing the internet by watching Return Of The Ape Man right now.

Stefan A.
11-04-2010, 09:55 PM
I thought everyone watching that poor Miss Teen USA from S. Carolina answering a question about locating Iraq on a map was killing the country? Oh, well...

Anyway, I like my Netflix thru the mail. I don't like streaming. Tried watching movies on the computer, but I can't stand it. And I don't want to buy a box for wi-fi streaming. I just hate change. And even though I like Netflix thru the mail, I still lament not having a brick and mortar store to browse in.

11-05-2010, 12:37 AM
The question alone is a bit of a stretch, without even reading the article, Netflix will not destroy the internet. Amazon will ruin it before they do.

But its not the internet that is getting destroyed, it is packaged media that is getting destroyed. The internet is becoming a point of attention, not marginalized or duplicated to the point of saturation. The fact is that many companies are competing for attention on the internet, even places you would least expect to want attention in the area of movies or music. But one thing Netflix and Amazon has accomplished is to cheapen packaged media to the point of near desertion. CD's are about as niche as a vinyl record these days. While DVDs still have some power in the market, its clear their days are limited. Devices like the iPad, iPhone, Droid and other mobile devices are utilizing streaming media and are getting better and better. Other devices like the Kindle or the Nook are putting books to rest, while in-the-moment news are replacing magazines and newspapers. While we are all lapping it up, it is at the cost of companies that were once regal in their respective markets. Downloading and streaming are the only means that these companies feel any control over their content. At a debate about porn, even Ron Jeremy mentioned the porn industry is hurting over bootlegging, downloading and torrents.

With the expansion to Canada, Netflix has a head start in moving streaming into a new market - the international one. We know it will be successful. What that means for movies and TV? No doubt it will eventually be homogenized. Not just content, but also the quality of TV and movie making. We see it already happening. If a world market is created where money is homogenized, then we are all in danger of living a life of sameness and art will become objectified and ruled into a higher order that determines what is acceptable for consumption.

I am looking at the pessimist side of things, so it could very well prove to be something entirely different and beneficial in the long run. But I would not say its beneficial if the economy is continually oppressed to think that its a bargain at $7.99 a month, but struggle to buy the survival necessities.

Stefan A.
11-05-2010, 11:34 AM
You make some good points, Anthony. The one you raised which scares me the most is this Kindle and other related reading gadgets. I don't own one, never have, and don't see myself ever wanting one. The idea if they were really to take off is scary. Possibly no more physical copies of books to get on the cheap or give away or even loan--because I know people aren't going to lend me a $200+ electonic device to read the Marquis de Sade's "Justine," which I'm not even sure is available electronically. Which, in turn, would mean such trash that I enjoy wouldn't get circulated and possibly made into a movie. It's scary and sad to think about. The only thing I know to do right now is not support it.

One thing I'm reminded of is Leisure's move to publish their horror titles online now. Their re-publishing Jack Ketchum's work help get a few of his movies made, at least I believe so.

But I do support Netflix via the USPS, so I guess I'm somewhat of a hypocrite in that regard. But everyone's a hypocrite to some degree. If I had the money to buy, or even a place to rent some of the titles I'm offered from Netflix, I like to think I wouldn't support them anymore.

John K
11-05-2010, 11:27 PM
This was an interesting article - I had no idea netflix streaming was such a powerful force. It's point about physical media being on the verge of disappearing seems rather obvious - I think everyone's basically expecting direct downloads to be the wave of the future. However, its central question is rather ridiculous - without even really understanding it that well, I can rest confidently assured that there will always be enough bandwith for us as a society to do what we want to do. Nerds are scientists, and nerds love the internet - its capabilities are always going to keep expanding and growing to meet our new needs and innovations. Just a few short years ago I recall sitting patiently at my terminal, waiting for a picture to slowly compose itself, line-by-line. Now I can stream HD in real time. I'm not worried at all.

I must say, though, that I see myself using Netflix's physical disks for a long time to come. My interests are too cult for everything I want to be supported by their streaming - while some of the stuff I want is up now, I know there's plenty more that it will take them quite a while to get around to. I don't stream all that often - mostly if there's just something I really want to see that I know they have. Otherwise, if I don't have a netflix DVD at the moment, I tend to turn my attentions to whittling down my own massive accumulations of media in my personal collection.

For me, the most disturbing thing about the article was the notion of someone starting a movie on his TV, watching 20 more minutes on his iphone, and then finishing it on his ipad later that night. While it's pretty cool from a technological standpoint, Jesus Christ - you sure as shit weren't giving that movie your full attention, were you? But I imagine my respectful approach to the artform is something that's becoming as dead as the dodo these days...

Steve Barr
11-07-2010, 01:17 AM
We're definitely living through the transition from physical to digital media right now. Netflix's usage is a wakeup call for net neutrality and against caps on bandwidth usage and overly-restrictive tiered pricing for internet access. We're all going to need a lot more bandwidth in the future as it will make sound economic sense to get anything digitally that you can. Going digital will also put a lot of book/music/movie stores out of business.

WRT ebooks, the benefit isn't having a particular book in digital versus paper form, it's the prospect of having your entire library accessible and searchable on your phone, your tablet, your computer, etc. It's like with music, the big change is having your whole collection fit on a small device, having the ability to stream music around your house, easily play days of music without repeating tracks, etc.

Every time I look for a particular DVD, I see the benefits to having my entire collection digital, so I can just type in the name of the movie and click play and send it to my TV.

There are dangers to all this as well. Those of us who watch other region films can order the DVD and play it in a region-free player. But with digital, the movie might only be available for streaming within a certain region, and one can only pay to see it using payment methods valid there. There's also the dangers of going digital:
- some content only being available for rental
- because of DRM, some content only playable on certain devices
- no way to buy used/"out of print" content
- previous/alternate versions might disappear

Steve R
11-07-2010, 09:42 AM

You hit on a real pitfall there, "no way to buy used/"out of print" content"

The rediscovery of another age's treasures has always been part of a collector's joy. Its almost like digging into the past searching for the diamonds that shine to you. On the one hand you find other things of interest you were never intending to search for. But even more significant is the feel of going back through time. A record from the sixites has a real texture. A book from the fifties, especially one of those cheap paperbacks with a lurid cover.

Sure its great that folks can just dial up Jim Thompson and click down a line of titles. But with all due respect to the digital age, seeing the title, "A Swell Looking Babe" doesn't hold a candle to seeing that salacious, seedy cover that promises a depraved reading experience to rival anything you've ever read before. Holding that book in your hands, at the back of some dubious second hand shop is really the best way to enter the world that Thompson wallowed in.

So yes, of course I applaud the access that the digital age gives to many books, records and movies that would simply fall between the cracks. But you've gotta know what you're looking for. The joy of discovery, the hunt if you will, has lost of lot of its allure. When you're a teenage kid just peeling back the edge of any one of these genres, its a special moment. I guess I'd like to see every kid given as much chance as possible to fall deeply and forever in love.

Tracing your hand over album covers, opening up double albums and checking the list of musicians for names you recognize should not become a lost feeling. Reading the blurb on a book, not matter how much bullshit it contains and noticing that the cover was by the person who did that other book you love is so much more than the right of purchase, it is a rite of passage.

Steve Barr
11-07-2010, 01:42 PM
You hit on a real pitfall there, "no way to buy used/"out of print" content"While you eloquently described the pleasures of searching and discovery, I had also meant to capture the potential loss we'll face when some content is just not made available after a certain period due to legal/business/etc. reasons. If everything is streamed and DRM'd, there may not even be a bad copy available illegally of what was once on the market, unlike today.

I think in the future it will be much easier to find/consume recent popular content aimed at your market. But the transition to digital distribution, by removing the need to guess at demand and press a bunch of discs, may make it harder to get content from other markets, esp. a year or two after release. I am so glad the folks at Celestial put out as many remastered Shaw Brothers discs as they did, even though the sales weren't what they wanted. Imagine if they had been able to get realtime data on interest and stopped after remastering ~75 movies, instead of the ~500 they actually did.

OTOH, there's always the possibility distribution will become so efficient and standardized that one could buy a new HK release from Amazon and stream it to your TV in the US. If content owners see the 'long tail' as being of sufficient value, they may keep older content online in the hopes someone will buy/rent it, we may have an environment where almost nothing goes "out of print".

Edward McDougal
11-07-2010, 02:18 PM
Pre-natal whales being harvested in plutonium based solvent, sealed in government issued mason jars will destroy the internet (earth)... NOT Netflix...aDUH

John M. Bernhard
11-10-2010, 04:00 PM
It's certainly killing service providers who cannot meet the demand of people wanting to stream titles.

11-10-2010, 05:59 PM
I don't think the move away from a physical media model is going to make content harder to find. If anything, it adds economic incentive to make more media available and removes the huge economic disincentive of having to pay for the process of creating and distributing physical media.

I would argue that the move away from brick & mortar stores to internet stores has vastly increased the availability of less mainstream entertainment because as the operator of an internet business I pay lower costs on facilities and labour and can afford to stock items with a lower marginal profit. In fact, since I don't even need to have physical stock until someone orders it, I can offer items for sale that I only know how top acquire. Amazon does that all the time with less popular items.

Similarly, if I don't even need to pay the costs of physical media, I can easily offer a much larger selection of choices.

11-14-2010, 12:46 AM
I think its happening in some cases, but yes, meeting the demands of streaming media will be a big deal. Think of how cell phones create plans for your smart phone needs. I have an iPhone and I can get varying plans that give me a certain amount of minutes. I can also get varying plans that give me certain amount of data, and lastly a plan for texting. I am sure all the other smart phones have similar plans. Well, with streaming, I dont see it a far fetch that with high downloading cable carriers, that they will start capping the amount you download and segment that into plans. So if you watch lots of netflix and it gets capped at some point, you start paying premium overages.

The other thing that I can forsee is that, while Netflix is certainly the biggest, Blockbuster is trying their best to get into the streaming market (their efforts to combat Redbox was a big waste of money and time IMO). Now if they are the two big-wigs on the streaming side of things, then its possible that one will get exclusivity to, say the Warner catalog, while the other the Paramount catalog. What then? Unless studios unleash everything to everyone, it wont matter. But then it will be a price war for membership - like cable subscribers today (which are on the decline). Lastly, there is the competition for exclusive material, such as "bonus" features that say, Netflix gets and Blockbuster didn't.

There will always be a varying difference between one service and other, but how that will pan out, we will see.

I have Netflix and I really enjoy it. I dont need the latest release. I particularly like the TV seasons and some of the obscure stuff. There is plenty of "out of print" stuff available on Netflix that have been put to rest on DVD. The service is relatively cheap (save for the device to broadcast it with). But I also watch hulu.com which offers streaming movies and are just now being installed into various devices to be watched on your TV.

So it seems that what we know as "TV" might also get infected by these streaming companies as they are a clear alternate to cable or broadcast television. We have heard that advertising revenues are starting to suffer (largely due to TiVo which blocks ads) so we end up seeing hulu double up their commercial breaks, or more obvious in-show advertising. Here is a clip from the last Bones episode clearly using the latest Microsoft smartphone, taking about 5 seconds of screen time to show how she gets a text message.

<object width="512" height="288"><param name="movie" value="http://www.hulu.com/embed/i12GnFHVc1DZ_HwU3RqQBg/1854/1883"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.hulu.com/embed/i12GnFHVc1DZ_HwU3RqQBg/1854/1883" type="application/x-shockwave-flash" width="512" height="288" allowFullScreen="true"></embed></object>

Netflix is great in the respect that its commercial free (yes, its a paid service like cable), but will that be something that will eventually go away? All "featured" content of youtube has ads, and now anyone can blast a stupid little note or ad or link in the middle of their content. And virtually all other sites that feature video content have an ad at the beginning of their video. Am I still on the right topic here?