Media

Flirting With Netflix, Cable TV Companies Court Danger


Netflix became the first streaming service to win a prime-time Emmy when David Fincher won the award for directing two episodes of House of Cards

Photograph by Patrick Habron/Netflix/Everett Collection

Netflix became the first streaming service to win a prime-time Emmy when David Fincher won the award for directing two episodes of House of Cards

Cable companies haven’t stopped seeing Netflix (NFLX) as a threat, but they do seem to be accepting the fact that it’s a reality.

Netflix is working on deals with cable providers that would put its service directly onto cable boxes, according to a report in the Wall Street Journal. The company has been steadily bringing the Internet onto televisions through streaming devices, game consoles, and the like. Last month, it announced a deal with Virgin, a U.K.-based cable provider, to offer Netflix to customers who use TiVo (TIVO) boxes. This would be the first time that U.S. cable providers sign up for a similar deal, although the Journal’s sources say nothing is imminent.

Netflix has said it wants to get into these kinds of deals for some time. And why not? By being just one click away, it will appeal to people who aren’t already streaming content, which is likely to drive more subscriptions. And with Netflix producing its own shows to look more like HBO (TWX), being available straight through the cable box blurs that distinction even further.

It’s less clear that this is good for cable providers like Comcast (CMCSA) and Suddenlink Communications, which are reportedly on the other side of the negotiating table. Netflix is arguably the biggest reason why people feel inspired to cancel their cable subscriptions. Its content currently makes up about half of everything that people watch on devices made by Roku, a leading choice for those fleeing cable. So while access to Netflix will likely remind Comcast’s customers that they like Netflix, it doesn’t solve their basic beef with cable: the monthly bill. How long before they realize it’s just one more step to cutting the cord altogether?

So offering Netflix access could be like opening the gates and rolling the horse inside. Customers who spend a few months watching nothing but Netflix through their cable boxes could easily decide to cut out the middleman. But easy Netflix access might also keep people who are more lazy than they are frugal happy for a long time. Increasingly, cable companies also see the potential in charging people incrementally for how much they use the Internet, so encouraging heavy Netflix use may be in their best interests in the long run.

Netflix’s aspirations to be more like HBO may also help the company fit into a model that cable companies recognize. If Comcast can start selling Netflix subscriptions directly to its customers in the same way it does for its premium channels, it can negotiate a commission from transactions that are happening whether it likes it or not.

There’s no doubt: Reminding people about the wonders of the Internet is a risk for cable providers. But it’s probably one they have to take.

Brustein is a writer for Businessweek.com in New York.

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Companies Mentioned

  • NFLX
    (Netflix Inc)
    • $340.05 USD
    • -2.05
    • -0.6%
  • TIVO
    (TiVo Inc)
    • $12.05 USD
    • 0.07
    • 0.58%
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