Not Scalable?
Think about it - if Netflix has only what 25-30 million subscribers and they already account for this much of the internet's traffic? Doesn't seem like a scalable system to me.
I am still old school - while I haven't rented a video from a video rental store in more than 20 years(my mother's boyfriend was personal friends with the original owner of Blockbuster and that guy used to send me a bunch of free rental tickets back in ~1991), there was a "recent" introduction of premium channels like HBO, Showtime, Movie channel, cinemax etc where I have gotten the bulk of my movies over the past 15 years at least (combined with Tivo which makes for easier watching of course - I haven't been without a Tivo on my personal TVs in 13 years now).
One of the side effects of watching everything through tivo though is I rarely am exposed to what is new, often times I find out about cool tv series long after it was canceled, or I flat out don't hear about a good movie, or if I do I forget about it by the time it hits the movie channels (sometimes if it sounds cool enough I set a Tivo title+actor wishlist to grab it if it won't be showing for another several months).
I did do Netflix for a while but after a few months quickly ran out of content, and then for the next year found I didn't watch more than 1-2 hours for an entire year (not per month but combined for the whole year) - (Netflix used to email me "how was the quality on X?" not sure if they still do that - I went back through those emails and realized that almost all of the titles in the previous year it asked about I did not watch more than a few minutes of) - I canceled when they raised their prices, I was renting an average of 1 dvd from them every 1-2 months(there was a bunch of dvds I wanted to see but I was just lazy when it came to returning them). Not really enough to be worth while. I keep hearing about content complaints and it seems their whole licensing model is broken (not their fault I guess since they can only do what the studios are willing to do), so stuff can come and go at any time.
I do watch a bit of youtube from time to time, not too much though.