A new report by The Diffusion Group reveals that of the Netflix subscribers who have broadband Internet access in their homes, more than 62% of them are using the “Watch Instantly” service to watch all the movies and television episodes that they want, at no additional charge. Perhaps the most telling result, however, is that more than half of that group are watching some or all of these videos on their TVs.

This is a signficant finding, because many people think that it’s too difficult or expensive to get the NetFlix content to their televisions. The advent of NetTVs — sets that can connect directly to a home network — and small adapter boxes such as Roku has made it easy for consumers to get Internet streaming video on their sets without having to install a dedicated computer in their living room. On the other hand, a simple desktop or laptop computer doesn’t have to cost much more than a Blu-ray player.

I would also add that NetFlix has also established an important precedent for this service; it’s free with a paid subscription. There is no per-movie or per-episode fee, so watching content from the “Watch Instantly” service feels no different than searching through your DVR for recorded content. The big difference is that there are no commercials to skip.

The number of people watching Netflix’s streaming content is growing rapidly, and these consumers are likely to resist efforts to switch them to a competing service that charges per view. For this reason, I don’t think that Apple’s efforts to get $.99 TV episodes on iTunes will gain much traction.

Posted by Alfred Poor, February 25, 2010 5:00 AM