U.S. cable firms embrace former foe Netflix as TV viewing shifts
U.S. cable firms embrace former foe Netflix as TV viewing
shifts
By Lisa Richwine and Anjali Athavaley August 5, 2017
(Reuters) - A growing number of U.S. cable operators are
forming alliances with Netflix Inc, a shift that is helping the streaming
pioneer add customers as its largest single market matures.
No. 3 distributor Charter Communications Inc is expected
to make Netflix available through its set-top boxes, joining more than a dozen
top U.S. pay television operators adopting a model first rolled out in Europe.
Some U.S. providers could start selling the streaming service as part of their
Internet and video packages.
Altice is trying that approach in France, and the company
aims to extend the deal to the United States, two sources with knowledge of the
matter said during the past three weeks. They requested anonymity because the
discussions are private.
"Our whole model is about cooperation with many of
the (streaming) providers," Altice USA Chief Executive Dexter Goei told
reporters in May.
Netflix also indicated it wants to take the arrangement
elsewhere, though the timing of any new deals is uncertain.
"We're now looking at proposals for including
Netflix in some services and beginning to learn the bundling part of the
business," Netflix CEO Reed Hastings said during a post-earnings webcast
in July. "We're interested in expanding that."
Additional tie-ups could help Netflix hook new users in
the United States, a market analysts have said is nearing saturation while
growth in foreign markets is booming. The number of subscribers is the key
metric for Netflix investors, and the breakneck growth has made the company a
Wall Street darling.
Netflix reported 51.92 million U.S. streaming customers
as of June 30, and 52.03 million in international territories, handily beating
analysts' forecasts.
The addition of Netflix to set-top boxes helped the company
top expectations for the U.S. market, Cowen & Co analyst John Blackledge
said.
The closer ties with pay TV providers represent an
about-face from the early days of Netflix streaming, which started in 2007.
Many in the pay TV industry viewed the digital upstart as a challenge to their
longtime business of selling bundles of channels delivered via cable wires or
satellites.
But as Netflix soared in popularity, distributors began
concluding it was more beneficial to welcome Netflix because their customers
were using the service anyway.
Cable executives see the partnerships as a way to help
fight cord cutting, the dropping of pay TV service, and to promote higher-speed
Internet service. In some cases, distributors receive a cut of subscription
revenue when they sign up new Netflix users.
The set-top integrations began in 2013 with Virgin Media
in Britain. U.S. partnerships started in 2014 with a few smaller distributors
including RCN Telecom Services.
For RCN customers with TiVo boxes, Netflix is listed as a
channel in the on-screen lineup, requiring just a press of a button to switch
from a cable network.
RCN viewers who have not subscribed to Netflix can do so
on the spot, starting with a one-month free trial. More than 80 percent become
paying Netflix customers, RCN Chief Operating Officer Chris Fenger said in an
interview. "There is a very high conversion rate."
By the end of 2016, 13 of the top 25 U.S. pay TV
distributors had similar arrangements with Netflix, according to Blackledge.
U.S. market leader Comcast Corp in November embedded
Netflix into its Xfinity X1 set-top box, which is used by 55 percent of its
21.5 million residential video customers. Thirty percent of X1 users have
logged into Netflix, either with an existing account or by signing up for a new
one, the company said in May.
Charter also plans to integrate Netflix, CEO Tom Rutledge
has said. A launch date has not been set.
(Reporting by Lisa Richwine in Los Angeles, Anjali
Athavaley in New York and Gwenaelle Barzic in Paris; Editing by Anna Driver and
Richard Chang)
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