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Summary:

Netflix continues to grow, with its streaming service now making up more Internet traffic than BitTorrent file sharing in North America. That might seem like a big win for Hollywood, but the traffic growth also comes at a time when ISPs are introducing bandwidth caps.

Reed Hastings

The amount of Netflix data passed over ISP networks continues to grow, with its streaming service now making up more North American Internet traffic than even BitTorrent file sharing. While that might seem like a win for Hollywood studios that have spent the last several years fighting piracy, the traffic growth also comes at a time when ISPs are introducing bandwidth caps that could constrain Netflix streaming.

According to Sandvine’s latest Global Internet Phenomena Report, the subscription streaming service now accounts for 29.7 percent of all peak downstream traffic in North America. That’s up 44 percent from the previous figure released in Sandvine’s Fall Study just six months ago.

Even in Canada, where Netflix has only been operating a short time, the service has had a significant impact on data traffic. Despite launching just last September, Netflix now has more than 800,000 subscribers, accounting for about 10 percent of the country’s broadband subscribers. And it now accounts for about 13.5 percent of data traffic there.

But it’s not just during peak traffic hours that Netflix rules broadband networks in North America. According to Sandvine, even when averaged over the entire day, Netflix accounted for 22.2 percent of North American data traffic. That’s more than even more than BitTorrent, which accounted for 21.6 percent of traffic, and had long been the single largest component of data traffic on broadband networks.

One could argue that’s good news for Hollywood studios, which have spent the last several years trying to combat the spread of their movies on peer-to-peer networks like BitTorrent. And while Netflix taking up a bigger share of broadband downstream data transfer is preferable to P2P traffic, Sandvine is careful to note that BitTorrent traffic isn’t actually going away. P2P filesharing only saw a marginal drop in share, from 19.2 percent in the fall to 18.8 percent six months later. And while P2P has maintained a relatively constant share, the absolute volume of traffic continues to increase.

The news of Netflix’s traffic growth comes as it is faced with a number of ISPs implementing bandwidth caps that could impact how much viewers can stream over their broadband connections. Already, it lowered the quality of streams it delivers in Canada to deal with overly restrictive bandwidth caps in that market.

But Netflix isn’t taking the threat of bandwidth caps lying down: The streaming company met with the FCC last week and shared a letter its CEO Reed Hastings had penned about the impact that broadband caps have on it and other Internet firms. In it, Hastings argued that bandwidth caps represent a huge markup over the incremental cost of delivering streams to end users, and said such moves could stifle innovation on the Internet.

  1. You should note that Netflix provides Canadians with the option to stream video at a lower quality. The option to view original, high quality is still available.

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  2. I would not say Hollywood won. I would say Hollywood LOST the fight and learned how to compete. MPAA & RIAA wasted so much money fighting their customers. The consumers won! We are getting products at a reasonable price. Still needs to improve but hopefully we will see the end of the MPAA-RIAA extortion system.

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    1. My thoughts exactly.

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  3. I think the consumer won. Many adults are happy to pay for services that they want- this idea that the common American is just looking to scam the system is a huge exaggeration. I know when torrents were the only way to get certain items, I’ve used them. However, when legally viable options were also presented, I prefer(ed) to use those. Netflix is great because they offer what we want to watch in a legal setting. They are also working to expand their “watch it now” offerings which makes it an even more attractive option for adults and their entertainment.

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  4. I would call this more win-win. The BitTorrent community has never been about stealing or free. For more than a decade their complaint has been that the media conglomerates have been missing the boat on cheap digital distribution technologies, and even fighting it to maintain outdated business models. BitTorrent (and Napster, and Kazaa, and other file-sharing networks) filled that gap. It was never about stealing.

    Netflix has finally filled that gap. It’s pretty much what everyone’s been asking for, but not listening to. And it wasn’t Hollywood that did it; it was Silicon Valley. Hollywood is still being dragged into the internet age kicking and screaming, as is the music industry.

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  5. One of the main reasons we all used to pirate was the serious lack of an alternative. The better solutions like Netflix mean that it’s just easier to click the button and have it instantly. I still don’t think it is all as good as it could be especially in areas like sports etc. I should be able to pay a couple of bucks on demand to see anything I want.

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  6. Lucian Armasu Tuesday, May 17, 2011

    What a surprise! When you offer your customers your content at a *reasonable* price, they might actually pay for it. The movie studios must be shocked!

    Seriously, people have been supporting this argument for years, but they still don’t really get it. And there’s the same argument with the music labels but they don’t want to hear about it. If anything they’d like to charge you even more for streaming music, or at least the company hosting that music (Amazon, Google, etc).

    Of course many of the people that would otherwise pirate would pay if the service is hassle-free(no DRM,etc), accessible from anywhere, and last but not least, reasonably priced for our times.

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  7. I believe the reason that BitTorrent is down is because of the fact there aren’t that many movies release on torrent now the big movies that attract the million downloads. Or the fact that some of the biggest uploaders are gone like aXXo and others.

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  8. Im not going back to what MAFIAA thinks I should use as my delivery model. I dont do TV and have completely quit downloading any content via P2P and I can thank Netflix for changing the convenience paradigm for me.

    So the studios and ISP’s better get on board or that new influx of licensing money from us happy Netflix customers. It could just as easily go away all together if they dont want to play ball with us on our own consumption terms. Perhaps they can still learn a new trick as an old dog.

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  9. It looks like Netflix is here to stay!

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  10. ReformedPirate Monday, May 23, 2011

    I’m a Netflix convert and I downloaded tv and movie torrents for years. With a fast connection from a private torrent site I could download a movie in 20 minutes (a little longer for HD) then stream it directly to my PS3 over a home network.

    It wasn’t about stealing it was about convenience.

    The MPAA just made it worse the way they tried to stop it. In fact I really think it was Hollywood insiders and directors that leaked the DVD quality screeners to the torrent sites before the movies even got released. Danny Boyle made a big public fuss about the Slumdog Millionaire screener that got leaked but I think it actually added to the popularity of the movie (and helped it win the Oscar).

    I love Netflix. Someone finally figured out what the consumer wanted and delivered. I even joke around that Netflix should do a marketing campaign with dimmed lights and disguised voices saying I used to download torrents but thanks to Netflix I can watch all the movies I want for only $8 a month, less than a 3 pack of blank DVD’s.

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