According to Fitch Ratings, subscriber losses at Netflix in third quarter 2011 (3Q11) indicate that over-the-top (OTT) TV will remain largely incremental to traditional pay TV. Fitch believes the cable and broadcast TV models, and their subscriber bases, will not be significantly negatively affected through at least the medium term.In Fitch's view, the OTT content lineup needs to be significantly larger and more compelling than it is now for OTT to be a viable substitute for traditional TV for a large portion of the population (and therefore a significant competitive threat). Fitch believes content acquisition costs for Netflix and other OTT providers will continue to rise due to both library expansion and higher prices demanded by the content providers. While subscriber growth will offset some of the costs, higher prices will be inevitable to retain profitability.Netflix's subscriber losses show the elasticity of demand for the service. Over time, consumers are likely to tolerate gradual price increases, but Fitch does not believe Netflix will have the ability to raise price to a degree that would allow it to quickly scale its library to compete with cable and broadcast TV.