A new report now suggests Netflix may actually be helping pay TV companies -- in particular, cable operators. Netflix has some 25 deals with pay TV providers. Worldwide, this includes Virgin Media, RCN, Com Hem, Suddenlink Communications and GCI, among others.
The report from market researcher IHS says that carrying Netflix is a “net-positive on the operational performance of those MVPDs.” Part of this is defensive, to “negate [the] cord-cutting threat.” IHS also says customer satisfaction has improved when pay TV companies add Netflix.
Still, Netflix doesn’t provide a “meaningful” revenue-generating opportunity for pay TV operators, according to the report.
The cable operator-cable network business relationship needs to be examined here.
In its early years, big U.S.-based multiple video program distributors took equity interest in many cable TV networks, benefiting in other ways, such as selling local advertising inventory -- all to spur the growth of the business.
But now that business dynamic is changing. Cable operators need to stay relevant in the growing digital space as a big TV “retailer” into the home. So making a deal with Netflix makes sense to some. To others, it might seem letting the fox into the henhouse.
Additionally, in recent years, cable operators had to make costly “retransmission” deals with broadcast stations/broadcast networks. Years before, cable operators carried those stations essentially for no cost.
TV analysts now worry Netflix is causing an erosion of viewers at both cable and broadcast networks. Netflix joins the cast of new uneasy business partners for MVPDs.
Now the question is what other digital media or OTT network programmers will also look to nudge onto set-top-box-based pay TV provider systems.