Netflix and its longstanding rival, the cable industry, may finally be cozying up.
According to The Wall Street Journal, Netflix is in "early stage" discussions with several U.S. cable providers, including Comcast and Suddenlink Communications, to install its service as an app on their set-top boxes. Netflix is already making its app available to about 1.7 million TiVo owners in the UK thanks to a deal signed with Virgin Media in the UK last month.
At the Goldman Sachs Communacopia Conference in New York late last month, David Wells, Netflix's chief financial officer, said the company "would love to reduce the friction to the end consumer" by making itself available on the devices already available in consumers' homes: their set-top boxes. He added that it is up to pay TV operators "to decide how much of a competitor they view us as or a complement."
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At present, Netflix subscribers who want to watch on their TVs need either an Internet-connected TV or an add-on console that connects them to the Internet, such as an Xbox 360 or Apple TV. In the latter case, they must switch TV inputs to navigate between their cable channels and their Netflix videos. As Wells said, making Netflix available on the same input would make it easier for existing subscribers to access its content — and make it more attractive for potential new customers who watch TV mostly (or even entirely) on their regular set-top boxes.
The benefits for the cable providers are less clear. Perhaps Netflix users might upgrade to faster, more expensive broadband connections to speed up their Netflix videos. WSJ suggests that the partnership would also give cable providers more leverage during carriage-fee disputes with TV channels: If Netflix has the same content as a channel in dispute, the cable companies could point users to Netflix instead.
There's also a risk that Netflix would compete directly with the operator's offerings, particularly their on-demand, pay-per-view movie services. But then again, Netflix already does that.
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