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Netflix controls 61% of movie streaming; stock jumps on upgrade [updated]

March 15, 2011 |  5:58 pm

Netflix now accounts for more movies watched on the Internet than all of its competitors combined.

According to new data released Tuesday by market research firm NPD Group, 61% of movies downloaded or streamed between January and February came from Netflix. Its next biggest competitor, Comcast Corp.'s video-on-demand, accounted for just 8%, followed by 4% each for DirecTV, Time Warner Cable and Apple's iTunes.

The numbers demonstrate just how dominant a player Netflix has become in online movies with its 20 million subscribers, more than two-thirds of whom have streamed video from the company for a monthly fee that starts at $8. Only one other company, Amazon.com, offers unlimited movie streaming as part of a subscription, its selection is smaller than Netflix and includes fewer recent releases. Other rivals such as cable video-on-demand and iTunes all make users pay separately for each film.

It's not the first sign of how huge a force in Internet video Netflix has become. According to an October report from the networking company Sandvine, Netflix accounts for more than 20% of all Internet traffic in the U.S. during peak nightime usage times.

The news comes as Netflix is reportedly making a new bet on the other side of its business, television streaming, which is rapidly becoming more popular than movie streaming for the company's customers. According to an unconfirmed report on Deadline, Netflix is negotiating to finance and air a new television drama called "House of Cards" produced by Media Rights Capital and starring Kevin Spacey.

[Update, March 16, 8:37 a.m.: A spokeswoman for Kevin Spacey, star and executive producer of the show, confirmed that talks are underway with Netflix.]

If the talks end successfully, it would be the first time Netflix bought rights to an original series, a much riskier business model than its existing one of streaming television shows that have already aired on a television network. Netflix did previously negotiate to finance and be the only home for a third season of the cult favorite Starz comedy "Party Down," but was unable to go forward as the cast had moved on to other projects, according to a person familiar with the matter.

In 2008, Netflix shut down a business called Red Envelope that acquired movies, saying it was awkward to be in competition with its studio suppliers.

It remains to be seen what Netflix investors would think of the company moving into original content. However, its stock already shot up 8% to $217.11 on Tuesday following an upgrade by analysts at Goldman Sachs, who increased their price target for Netflix stock from $210 per share to $300.

Netflix stock had dropped 6% last Tuesday after Warner Bros. set up a new movie rental offering on Facebook, raising concerns that the popular social networking site could become a viable competitor in film streaming.

But the Goldman analysts said it was unlikely that Netflix will face a serious challenge anytime soon from Facebook, Amazon, Google or other potential competitors. "We believe that the demand for
video streaming could be big enough to sustain multiple business models," the report said, addressing companies that offer pay-per-transaction video-on-demand.

As for other companies offering unlimited streaming for a monthly fee, "We believe that as each quarter passes, it becomes more difficult for a new entrant to compete," the report said. Goldman estimated that Netflix will add between 2 million and 4 million subscribers for each quarter, totaling 8 million to 16 million for 2011. Last year it added 7.7 million customers.

-- Ben Fritz

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