Netflix Is Winning, but Who Is Losing?

Netflix commands more than a third of the country's peak Internet usage.

May 14, 2014 at 6:05PM

This is Netflix's (NASDAQ:NFLX) world and every other content distributor is simply streaming in it. Internet traffic tracker Sandvine is out with its semiannual report on streaming trends, and the leading service continues to pad its lead.

Netflix accounted for 34.2% of the Internet's peak downstream traffic during the first half of the year in North America, up from a still healthy 31.6% during the latter half of last year.'s gaining ground with Prime Instant, but it still accounts for a meager 1.9% of downstream traffic. We'll see if the addition next month of several iconic HBO shows helps boost Amazon's fortunes.

Think about that for a moment. Netflix streaming is taking up more than a third of the country's downstream traffic during peak usage periods. Sandvine also points out that the top 15% of video users -- categorized as exhibiting "cord cutting" behavior for their dependency on streaming -- took in an average of 100 hours of Internet video a month. Let that marinate, too. We're talking about folks spending an average of more than three hours a day streaming video. 

If Netflix and streaming video are gaining so much ground, who is losing? We know it's not Netflix. Despite accounting for less than 2% of peak downstream traffic it is actually gaining market share. Despite the 15% of the country consuming 54% of the total monthly network traffic, it's not as if those cord-cutters are leaving much of a mark. After a few years of declines we're seeing stability and even growth at some of the country's leading cable television providers.

It's not as if cable customers think that they're getting a good value. In another round of mind-blowing data last week, TV ratings tracker Nielsen revealed that the average U.S. home receives 189.1 channels but only watches 17.5 of those channels on average. We're watching just 9% of the channels that we're paying for, or -- put a more dramatic way -- we're paying for 91% of channels that we never watch. 

But we can't introduce logic when data tells us otherwise. Comcast is coming off back-to-back sequential increases in video customers, and Time Warner Cable posted its smallest sequential decrease in five years. 

So where are all of these hours that we're spending on Netflix coming from? Real-time viewing of broadcast TV is an easy target, but we can't ignore that video game sales have been slumping through most of the streaming video revolution. Even mobile gaming has come under fire lately with back-to-back quarters of sliding sequential bookings for niche juggernaut Candy Crush Saga.

In the end, Netflix's growth isn't coming at the lone expense of the pay-TV industry. The hours spent streaming today were the hours we spent playing games, reading books, or perhaps even surfing the Web in previous years. Netflix is throwing a bigger net than you think.

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Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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