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Netflix Touted as Budget Saver

14 Feb, 2011 By: Erik Gruenwedel

Analysts and industry pundits spent much of 2010 characterizing Netflix streaming as a catalyst to cable subscribers looking to downsize their premium video services, including transactional video-on-demand.

Now, the online disc rental pioneer is being heralded as a key ingredient for consumers looking to cut $50 a day from their household budget.

Kiplinger.com Feb. 14 included Netflix’s $7.99 per month streaming service as an alternative to more costly cable and satellite TV monthly bills — a move it said could save the average person $648 annually. In other words, subscribe to Netflix and save money.

“Don't pay for dozens of TV channels you don't watch,” the report stated. “Go basic and save big. For $8 a month, you can watch unlimited movies and TV shows (albeit not always the latest offerings) via your home Internet connection.”

Indeed, the report said many consumers don’t realize local cable, satellite and telecommunications operators offer basic monthly packages around $15 when eliminating more costly premium channels such as HBO, Showtime and Epix, among others.

Time Warner Cable, in its most recent fiscal quarter, reported a net loss of 141,000 residential video subscribers. Comcast and Charter also reported declines in their monthly video subs.

Yet, mere mention of the trend evokes incredulity among many media companies, analysts and even Netflix.

But Phil Leigh, analyst with Inside Digital Media in Tampa Bay, Fla, is of a different opinion.

Leigh, who has written electronic book “How to Cut the Pay-TV Cord” (Amazon/Kindle eBook), said the article underscores a “chain reaction” effect as market speculation meets economic and consumer reality. At the same time, Leigh said it is not in Netflix’s best interest to jump on the cord-cutting bandwagon when its streaming service is distributed into homes via cable’s broadband connections.

“It will result in increased pressure from the cable companies to the media suppliers to stop licensing content to Netflix,” Leigh said.

In addition, the analyst said it is easy for Netflix to agree with cable or satellite TV operators that decreasing video subscribers is a temporary trend.

“It’s insipient as opposed to a minor trend,” Leigh said, adding that responses from cable operators mirror those of the record labels a decade earlier regarding declining CD sales in the face of electronic distribution and iTunes.

“We are getting the same denial of the undeniable,” he said.

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