How BitTorrent Could Kill Off Netflix

When Netflix started out in 1997 as a side project aiming at the DVD rental market, the last thing the two founders could have imagined they were doing was creating the foundations for the most successful online streaming business on the planet.

Last week Netflix announced it had added 3 and half million new subscribers in the third quarter, 50% ahead of analyst expectations, with full year revenues now expected to top $10Bn compared to $7Bn in 2015.

So how does a garage project go from mailing a few DVDs a week to killing off established home movie rental businesses like Blockbuster in less than two decades? Technology, customer convenience, low costs and content.

But while investors streamed into Netflix shares last week pushing up the stock by 20% to $120 per share in just a few hours, VC’s are already looking at the next technology breakthroughs that could come to disrupt Netflix and the many other streaming subscription services.

Streaming TV services are already growing at a fast pace, with many viewers combining online only services with terrestrial catch-up episodes. And millions more people are replacing their satellite receivers with internet only TV services.

Torrent Streaming

A promising area for potential disruption was highlighted by Netflix themselves when CFO David Wells confirmed that the company is looking into supporting Bitcoin to overcome limited online payment options in its growth markets.

The problem for Netflix operating an online business with an easily accessible internet payment channel such as Bitcoin is that it opens the door to competition from anyone.

Last year several venture capital firms backed Bitcoin start-up JoyStream which is looking to leverage existing BitTorrent technology to offer paid for streaming content. And they are not alone, another start-up competing with JoyStream, vTorrent, is also aiming at the same BitTorrent user base.

While JoyStream and vTorrent are yet to go live, when they do launch in early 2017 they will immediately be connected to 300–500 million existing BitTorrent users, compared to Netflix’s 90 million subscribers.

The potential to reach this existing global market of 300–500 million BitTorrent users has investors salivating at the prospect of backing start-ups that could be the future Netflix or Amazon Video.

It took Netflix and other streaming services less than 10 years to kill off movie rental stores. With the internet now firmly established around the world, it could take just a few years for new start-ups to gain traction and give Netflix shareholders a reason to worry.