Since its founding, Netflix (NFLX) has been hailed as an
industry changer and a fad. Critics attack its pay model and rapid
pace of growth as untenable, while supporters contend its streaming
service represents the future of media. Which side, though, is
right?
The user base for Netflix has grown precipitously over the course
of the past decade. During its
first fiscal quarter
this year, the company added 3.6 million users, boosting its
audience to 23.6 million people - nearly the same as cable titan
Comcast (
CMCSA
).
Still, critics of Netflix argue that user base growth will
inevitably slow and that its $8 per month fee is far too low to
sustain the high costs of securing licensing deals with content
producers. In December, Time Warner (TWX) chief executive Jeffrey
L. Bewkes
made headlines
when he belittled Netflix's burgeoning market clout.
"It's a little bit like, is the Albanian army going to take over
the world?" Bewkes said during an interview. "I don't think so. At
$8 to $10, it doesn't have the economics to support high-value
programming."
However, Netflix has inked deals with a variety of content
distributors
like Miramax
and
CBS
(
CBS
) this year alone, increasing the number of titles available in its
already expansive instant streaming catalogue. Moreover, adhering
to a low monthly pay model and aggressively growing its streaming
library has proven successful thus far: A report released this week
found that Netflix now
accounts for 30 percent of all North American
Internet traffic
during peak usage times - a 10 percent surge from October 2010.
With an untapped global market still left for it to conquer,
Netflix has plenty of room to grow. Further, throughout its history
the company has swatted away concerns about its ability to compete
against established industry titans simply by overtaking them.
Blockbuster was the first company
to fall victim
to Netflix. Is Comcast next?
