In our April 1 OTT Monitor, we joked that Time Warner Cable had discontinued their VOD efforts and integrated Netflix. Well, it looks like this might not entirely be a joke. This week at the Cable Show in Chicago, Melinda Witmer, TWC's Chief Programming Officer, commented:
"Consumers are getting [Netflix] on every device that's coming on an IP basis today but not the set top. They look like a programmer to me and it makes me sense that we'd be doing business with them in the home on our equipment, too."
What Ms. Witmer sees is an opportunity to plug Netflix in as a premium service for TWC customers. As she went on to say, TWC is great at selling subscriptions to their customers. What could be better for TWC than selling Netflix subscriptions, at a decent markup price, of course? It's already proven a winner with 23 million customers, after all, and talk about a way to co-opt the momentum of a growing competitor!
There are some difficulties with this idea, of course. How will HBO react if suddenly Netflix is available on cable, particularly if the service costs less than the $18 a month HBO charges? As well, it's not clear Netflix has the rights to deliver on cable.
But what would Netflix get out of the relationship? The company continues its spectacular growth, adding 3.6M new subscribers in the first quarter of 2011. As well, 54% of Netflix streamers are already cable customers so the company is having no trouble reaching that audience without cable's help.
It's also hard to see what end users might get out of cable/Netflix partnership. Assuming cable operators would want a $3 per month markup on the service, why would a consumer subscribe through cable for $11 when they can go direct over broadband for $8 a month? Then again, why would Netflix be willing to sell its service to TWC for less (say, $5 a month) when it could go direct and get $8?
No, there really isn't much added value for either Netflix or consumers in a cable relationship. Ms. Witmer et al. will have to look elsewhere for ways to prop up their increasingly shaky value proposition.
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