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Netflix is partnering with an increasing number of cable providers and pay-TV operators, and over 12 in the US incorporate the service in their set-top boxes, Reuters reports. (Charter is the latest to do so.) Netflix CEO Reed Hastings said the company is looking for proposals to package Netflix in certain bundles, such as internet packages.
As its US presence matures, the streaming service is looking for new ways to attract domestic subscribers, and partnering with cable providers is one way to diversify its subscriber acquisition strategy.
Here’s why these partnerships matter:
- It can help TV providers stem against losses associated with cord cutting. Netflix is the clear leader in the over-the-top (OTT) landscape — Netflix reached 75% of OTT homes as of December 2016, while YouTube and Amazon reached 53% and 33%, respectively. This can help explain why most pay TV providers likely now view Netflix as something that could keep viewers within pay TV viewing ecosystems, rather than a threat.
- The partnerships can lead to high engagement and conversion rates. RCN Telecom Services — a relatively smaller distributor — lists Netflix as one of its channels, and over 80% of RCN customers become Netflix subscribers, according to RCN COO Chris Fenger cited by Reuters. Additionally, Comcast integrates Netflix into its Xfinity X1 set-top box and 30% of those users have logged into Netflix.
- It can also help fuel international expansion. Partnering with cable providers gives the company more reach and consumer awareness across foreign markets. This is important as nearly 78% of Netflix’s Q2 subscriber additions were international, and international accounts for slightly over 50% of Netflix’s total membership base. It already partnered with Altice in Q2 2017, and is likely to expand this approach moving forward, according to its Q2 letter to shareholders.
Netflix could further accelerate international growth by striking partnerships with companies besides cable providers. For example, it could look at partnering with large retailers. Amazon is able to entice consumers to subscribe to its video service with Prime. And while Netflix only has its video streaming service, it could become more attractive by striking product distribution deals with large retailers, according to Crowdtap CEO Matt Britton. Moreover, these types of deals are likely less costly than drawing in subscribers from original content development. Netflix credits its subscriber growth to its strong original content, but it hasn't come cheap — it has accumulated nearly $20 billion in long-term debt associated with its original shows.
BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on the death of the set-top box that:
- Breaks down the FCC’s proposal to unlock the set-top box.
- Explores the impact the proposal has on major stakeholders.
- Forecasts the rental set-top box revenue for select pay-TV providers.
- Discusses opportunities the proposal presents for native tech companies.
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