
Netflix  started life by putting the squeeze on Blockbuster with DVD rentals and  soared to unparalleled success with its Watch Instantly platform. Since  2008, Netflix’s library has swelled as the company signed multi-million  dollars deals with content providers including Starz and CBS (yeah,  we’re still excited about 
     all of Star Trek coming to Netflix,  too). With all that content, Netflix has obviously changed the way we  watch movies and TV on a daily basis--but just how much has it  revolutionized the online landscape?
Two  web analytics organizations have 
   weighed in on Watch Instantly’s  popularity and its impact on peer-to-peer file sharing. According to one  study, bittorrent has taken a big hit since 2007, with Netflix stepping  up to fill in the gap.
Wired  polled Arbor Network and Sandvine to rustle up any evidence suggesting  Netflix’s streaming service has eaten into peer-to-peer movie sharing.  With more than 23 million subscribers, Netflix is poised to become the  largest subscription-based entertainment service in the US. That  popularity has driven Netflix traffic into the stratosphere--it  represents something like 20% of US downstream bandwidth during peak  hours. According to Arbor Network, bittorent traffic fell from a high of  more than 30% of US traffic in 2007 to a mere 8% of 2011’s measured  bandwidth.
That  30% included all types of peer-to-peer filesharing, and some of that  traffic has doubtless carried over to direct download sites like  Rapidshare. Still, that drop in traffic leads us to two possible  situations: Netflix’s growth (Arbor measures it at 20% of current US  traffic) has actually impacted P2P traffic over the past four years, or  non-P2P services have grown so significantly that P2P simply represents  less bandwidth by comparison. The real answer probably falls somewhere  in between.
The  second traffic measurement from Sandvine tells a different story. It  shows dramatic growth in Netflix streaming--from 29.5% of North American  traffic to 42.7% between 2009 and 2010--but also depicts a  
rise   in P2P filesharing over that same period. Sandvine’s traffic readings  indicated peer-to-peer sharing jumped from 15.1% to 19.2% of bandwidth  between 2009 and 2010. Obviously there’s no real consensus on Netflix’s  mighty influence, but there are two major factors that still make piracy  an attractive alternative to Netflix.
Watch  Instantly’s library must continue to expand to win out against  piracy--even if pirates are willing to pay $8 per month for their video  content, they’ll go right back to torrenting if something isn’t  available for instant streaming. The second problem, of course, is  quality. So far Netflix’s HD support remains limited, and only the  PlayStation 3 offers streaming of 1080p video. As long as streaming  remains sub-1080p and Blu-ray rips are easy to come by, piracy will own a  nice little chunk of bandwidth usage.
Streaming quality will only get better as 
     average broadband speeds continue to improve,  but we wonder how much Netflix can offer on Watch Instantly while  remaining profitable. The service already contains an obscene amount of  content, and Netflix will have to pay 
     hundreds of millions   in the coming years to secure new deals with providers like Starz. But  if it can conquer that hurdle and by gaining even more subscribers, P2P  numbers may look pretty meager within the next half decade.                                                                                                        
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