Netflix in talks with cable TV providers to include app on set-top boxes
What: Netflix is reportedly in talks with several cable TV providers, so as to become a staple in set-top boxes and not just online.
Why is it important: Cable TV providers may actually have realized that instead of fighting with online streaming services for audience, they can collaborate in an ever-changing marketplace. This will pose new challenges and opportunities for marketers and advertisers.
According to several sources, a number of cable TV providers, including Cox Communications, Comcast and Charter, are in talks with Netflix, reportedly to make it available on set-top boxes, therefore widening viewer access to its subscription service. In fact, Netflix shares soared nearly 8 percent Monday, when word of the talks first became known. Netflix and cable companies have been rivals, but by making the streaming service easier to access for consumers, cable providers may attempt to reduce the migration of viewers to online TV shows.
As stated in WSJ, Netflix, often viewed as an alternative to pay-TV, is already available on many devices. But the fact that cable companies are considering inviting it in suggests they no longer view it as a threat, as broadband, and not video, will be the source of cable's future growth.
Netflix is one of the top sources of U.S. Internet traffic and a primary reason that consumers pay up for faster speeds. An app on the cable box will make it easier for existing pay-TV customers, many of whom already subscribe to Netflix, to watch while keeping them on cable.
Last month, two European cable companies –Sweden's Com Hem and Virgin Media in Britain– struck deals to allow their customers to access Netflix through Tivo set-top boxes. David Wells, Netflix Chief Financial Officer, speaking at a Goldman Sachs investor conference last month, said that the company was willing to strike similar deals with U.S. cable companies.
As a matter of fact, having Netflix on cable boxes may pose a bigger threat to TV networks than to cable companies, according to Janney Capital Markets, because more people watching Netflix could mean the online streaming service would be paying networks more for their content, but making it more like another cable channel could mean TV ratings would rapidly decrease, threatening advertising dollars and potentially even affiliate fees.
TV networks could respond by pulling their content out of Netflix. However, that might not be a good idea, as subscription video on demand accounted for 5% of operating income for the six largest media companies in 2012, according to Sanford C. Bernstein estimates, a number that will likely grow over the next years.
According to WSJ, negotiations are in the early stages, with no deal expected soon.
For the time being, according to Reuters, after the success of political thriller "House of Cards", Netflix has already ordered a new psychological thriller series from Sony Pictures Television and the creators of the FX legal drama "Damages." The 13-episode first season, from the unit of Sony Corp, will premiere exclusively for Netflix members to watch instantly, the company said on Monday.
"House of Cards," a sleek political drama from a small production company led by actor Kevin Spacey, was released in a similar manner by Netflix early this year. Its success with critics elevated the stature of programming delivered solely over the Internet, a field that is attracting the biggest names in Silicon Valley and a roster of A-list Hollywood stars.