Netflix Now Officially Bigger Than Comcast
Netflix continued to post impressive quarterly financial numbers, ending the first quarter 2011 as the largest subscription video service in North America. — In the first quarter, Netflix added 3.6 million subscribers, ending the period with more than 23.6 million subscribers in total.
Context & Ripple Effects
The milestone is a fast one: three months after adding 7.7 million subscribers in 2010 to pass 20 million, Netflix tacked on another 3.6 million in the first quarter, ending it with more than 23.6 million subscribers and the title of North America's largest subscription video service. The Washington Post had already framed the arc in March, arguing that Netflix's own success is now the biggest threat facing the telecom industry.
The scale of the story is visible in its travel: TechCrunch's same-day pickup led with earnings up 88 percent alongside the subscriber number. Around the milestone sit confirmed product moves — an investor-FAQ pledge to introduce streaming plans supporting multiple devices later in 2011 and a Kinect-enabled Xbox 360 app — plus two unconfirmed threads: reports that big firms are lining up to challenge Netflix's dominance, and a rumored $100 million five-year deal for Miramax's catalog.
First-order effects
- Comcast is no longer just the incumbent cable operator competing with Netflix; it is now the second-largest subscription video service in North America by the measure that matters most to Wall Street, subscriber counts.
- Netflix's confirmed plan to sell multi-device streaming plans later this year converts its scale into pricing power, letting it charge more per household without adding subscribers.
Second-order effects
- Cable and telecom operators whose broadband pipes carry Netflix traffic now face the squeeze described in the March Washington Post analysis: their own video revenue eroding while the growth product rides their networks.
- If the rumored big-firm challenge and the reported Miramax catalog deal both materialize, content owners gain a bidding alternative, raising the price Netflix must pay to keep its library advantage exclusive.
Third-order effects
- A subscription video service out-sizing the largest US cable operator marks the point where pay-TV's center of gravity starts shifting from distribution ownership to library and interface control — a structure HBO-style incumbents and device makers will have to respond to if the pattern holds.
The trend: Subscription video is consolidating around a single scaled player whose growth rate compounds faster than legacy distributors can reprice their bundles.