Last week, Netflix CEO Reed Hastings said that the prospect of having cable operators offer his streaming video service to their customers was “not in the short term” as a possibility — but was “in the natural direction in the long term.” His definition of “short” and “long” is open to debate, though: He’s already in talks with “some of the largest U.S. cable companies,” Reuters reports. It adds that by year end at least one cable company could offer Netflix on an experimental basis. The story doesn’t identify the operators negotiating with Netflix; Comcast recently unveiled its own online video service called Streampix. A Netflix-cable alliance could diminish the talk about cord-cutting. Some analysts say that pay TV subscribers looking to save money increasingly will cancel the $65-a-month video service and replace it with Netflix’s $7.99-a-month package, which mostly consists of older TV shows and movies. It also would give cable subscribers an alternative to premium channels led by HBO.
Yet some analysts wonder whether Netflix’s talks with cable are a sign of weakness. It “could signal that (Netflix) needs new mechanisms to drive sub growth and that it could be concerned about the looming implementation” of broadband usage based pricing — which would make heavy users pay higher fees — says Janney Capital Markets’ Tony Wible. He adds that HBO could respond by offering its HBO Go streaming service directly to consumers, instead of requiring them to first subscribe to basic cable. That could turn the premium channel into a formidable competitor to Netflix. Susquehanna Financial Group analyst Vasily Karasyov questions whether a Netflix-cable alliance could work. By taking on a partner, Hastings would either have to agree to raise Netflix’s price — which got the company into a lot of trouble last year — or accept a smaller piece of the action. Both prospects “are unlikely to be exciting for the company’s management or shareholders.” Still, investors seem to like the news: Netflix shares are up 3.9% in pre-market trading.
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