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Olympics streaming saps Netflix traffic

25% drop could confirm Hastings' 3Q fears

It turns out Netflix may not have been paranoid after all about the threat posed by the Olympics to its streaming business.

Streaming activity for the Los Gatos, Calif.-based company dropped 25% in the U.S. on Sunday from “normal levels,” according to research from Procera Networks, a technology provider for broadband networks.

Netflix CEO Reed Hastings anticipated the company’s second-quarter earnings call last week that the Olympics could suppress both subscription and streaming levels in the upcoming quarter in the U.S. NBCUniversal has been offering live streams of many different Olympic events via NBCOlympics.com throughout the Summer Games from London.

Netflix my have felt the downturn most acutely on Sunday because it proved to be the most active day yet for streaming the Olympics in the U.S., which Procera noted increased in volume by 100% over the first two days.

Procera added that Netflix streaming didn’t show any significant deviance from normal levels on the first two days of the Olympics, which began last Friday. Netflix streaming in Canada was at normal levels, which Procera analyst Cam Cullen attributed to the country not being as competitive in the Olympics as the U.S.

“With the peak levels that we mentioned earlier for Olymics streaming, something had to give, and in this case it was Netflix,” wrote Cullen.

Reached for comment, A Netflix spokesman replied, “Even if the figures you cite are correct, one night’s traffic does not a trend make.”

In his investors’ letter last month, Hastings cited the Olympics as a contributing factor in a projection of reaching anywhere between 1 million-1.8 million subscribers in the third quarter. If Netflix can’t hit the high end of that estimate, it will fall short of the 7 million total for the year projected in 2011.

Cullen calculates “normal levels” by comparing streaming activity on a particular day to the average of levels on the same day over the previous two months, June and July.

Procera also noted that the Olympics may have actually helped traffic on social networking hubs like Facebook and Twitter, which were up collectively by 25% during the first two days in North America alone. YouTube is also at normal levels.

Cullen also credited NBC making streaming widely available for cutting down on piracy of the opening-night ceremony, which was ranked very low on an unspecified leading torrent site index over the weekend.

Procera tracks broadband usage across its customers worldwides which include six of the top seven cable operators in North America, in addition to several DSL services and mobile operators.

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