Netflix Customers Move Online; ISPs Overwhelmed

It's likely going to be many years before people stop buying movies on DVD. But rental giant Netflix is not only preparing for that day, but attempting to bring it closer.

The company has announced that it will, for the first time in the US, be offering a special package that only allows users to stream rented titles over the Internet, with no option to obtain discs.

To encourage users to make the switch, the new package will be $7.99 a month (the lowest ever offered by the company), while the price of the packages that include getting discs by mail will rise by at least $1 a month. The price rise is immediate for new customers and takes effect for existing customers from January. (Source: netflix.com)

Online Consoles Boost Streaming Uptake

The company says it's making the move after reaching the point where users as a whole watch more of its content online than on disc. That appears to be largely down to an increasing number of customers accessing streamed content through next-generation gaming consoles, including the Sony Playstation 3, the Nintendo Wii, and Microsoft's Xbox 360.

Many users find this more convenient for movie watching as the console is already connected to the Internet as well as being hooked up to a TV, often through a high-definition connection. (Source: gamasutra.com)

So dramatic was the shift that the company has decided against launching new packages that only include the disc option, with no streaming.

The online packages offer two main advantages to Netflix: it can offer more attractive pricing, as it doesn't need to pay shipping costs to and from subscribers homes. In addition, Netflix doesn't have to worry about inventory levels, whether that be wasting money on unrented discs, or running out of popular titles and leaving customers unsatisfied.

Netflix Streaming Claims One Byte In Five

Not everyone will welcome the switch, however: Internet service providers (ISPs) fear an increase in demand for bandwidth. One recent report claimed that during peak evening hours, Netflix is responsible more than 20 per cent of all Internet data downloaded by users in the US.

In Canada, where the company only began doing business in September, it took only 1 week before the company was responsible for more Internet traffic than YouTube.

The increased demand is doubly ironic for cable Internet providers, who are already starting to feel the pinch as subscribers cancel premium packages and instead watch online video.