Streaming video cannibalizing DVD rentals, says Netflix

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Falcon01

Jan 28, 2009 - CST 9:44 AM

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Those who make use of Netflix's ever-popular "Watch Instantly" streaming service rent fewer DVDs than the rest of the population, a Netflix executive revealed during the company's quarterly earnings call on Monday. The phenomenon reinforces the fact that online offerings really do compete with physical media for the same pieces of the movie pie, and that could prove worrisome for Blu-ray as online video continues to grow in popularity.

During the call, Netflix CEO Reed Hastings noted that there were millions of subscribers using the Watch Instantly feature, and that Netflix had seen a "substitution effect" among subscribers who do so.

"We are seeing early signs of less DVD usage with some subscribers who are also watching instantly as compared to subscribers who only receive DVDs," said Hastings. "Time will tell whether this substitution effect is an attribute of early adopters or a mainstream behavior."

Our money is on it becoming a mainstream behavior. Online video has gone great guns with the likes of YouTube, but movie rentals and streaming stumbled badly out of the box. Users now have a plethora of compelling options to choose from, and that's going to take a bigger bite out of DVD and Blu-ray as time goes on.

http://arstechnica.com/media/news/2009/01/streaming-video-cannibalizing-dvd-rentals-says-netflix.ars

There's more at the link.

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