Integrating Netflix into traditional pay-TV services, such as Virgin Media and BT TV, has had a net positive impact on these operators’ performance, according to research by IHS.
These partnerships are not appropriate for all, though – operators investing in their own movies and entertainment content, such as Sky, typically remain wary of working with Netflix. In the longer-term, there is a risk that Netflix will put pressure on some of operators’ core services, including premium movie packages and video-on-demand (VOD) offerings.
These conclusions are from a new report from IHS, Netflix on Pay-TV: A Marriage of Convenience, which was compiled from interviews with executives from companies across the pay-TV value chain, including operators and their technology partners. The data underlying the analysis is sourced from company reports and from IHS market intelligence and forecasts.
Netflix has partnerships in place with 25 pay-TV providers, IHS says, with many more likely to follow after the over-the-top (OTT) video giant expanded to 130 new territories last month.
“Many of the operators working with Netflix have seen customer satisfaction ratings improve under the partnerships, which have helped foster positive operational performances,” said Ted Hall, research director at IHS Technology.
Revenue-wise, however, operators typically receive a share of the ongoing subscription fees only for customers that sign up via that operator’s set-top box, the IHS report says. This is insignificant, as most Netflix users either already have an account or sign up via a more user-friendly device, such as a PC/laptop or tablet.
“Netflix is a both less lucrative and more dangerous content partner to work with than the other premium networks pay TV providers traditionally partner with, such as HBO”, Hall said. “But collaborating with the ever-popular streaming service is necessary for many operators positioning their platforms as one-stop-shop ecosystems for TV and video content.”
The results from the IHS survey generally support the view that third-party video-steaming services positively impact operators’ performance and complement traditional channels and VoD offerings. However, caution remains over how this dynamic could change as Netflix becomes more popular, with some operators wary that it has the potential to negatively impact core pay-TV services and, in turn, average revenue per user and revenues overall.
“Netflix plays at least some – likely small – role as an upsell driver for some operators, whose customers can only access the app via their most advanced set-top boxes,” Hall said. “This is the case for 10 of Netflix’s 25 operator partners, primarily those using TiVo as their technology partner, in addition to Orange, Bouygues and Elisa.”
However, concerns were also expressed that some of operators’ core channel packages and VOD services could be at risk in the longer term, as growing numbers of pay-TV subscribers access Netflix.