The line between cable television and online digital rivals such as
Netflix has blurred further recently, as Netflix is in talks with cable
providers to make its service an application from cable set-top boxes. Marketers
in the digital space should take pause with this development, as it may
diversify the viewing audience away from the traditional demographic associated
with Netflix in its current “online-only” form. While Netflix quietly partnered
with Virgin Media in the UK for this arrangement—the first of its kind—talks in
the US would represent a further commitment to this new business model.
This is an interesting proposal because Netflix and cable operators have
traditionally been at odds with each other over customers, particularly in
relation to the recent rising trend of “cord-cutters.” However, the new
proposed relationship could make sense, as it would incent other users to try Netflix
through their televisions, furthering its subscribing user-base, while allowing
Netflix to co-exist with its cable operator rivals via incremental revenue to
these operators.
Several major cable providers, including Comcast, Verizon, and Time
Warner, have declined the arrangement in its present form. Since these are by
far the largest operators in the US, Netflix will likely need to sweeten its
offer or change the business model in order to appeal to these potential
partners.
Digital marketers and advertisers could be affected by this development
in a multitude of ways, as it may make the Netflix platform more ubiquitous
across US households and further limit the amount of live television that is
viewed. The breakdown of marketing budgets for video content would need to be
changed to account for the gradual change in viewing habits relative to this
development. For now, this deal appears stalled in its current form, but it
warrants following over the next several months to gauge the traction Netflix
is able to make.
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