Insights Blog

Why Netflix Needs Cable Partnerships

Netflix OTT cable partnerships

We are living in a new era of content viewing. In the last decade, streaming services like Netflix and Hulu have changed the game when it comes to giving consumers access to their favorite shows anytime, anywhere. However, recent figures show that previously explosive adoption rates might now be slowing down. In fact, Netflix recently announced its weakest subscriber expansion in three years.

As streaming services look to adapt in an increasingly digital world, they need to find different avenues to engage viewers and identify opportunities to reach new audiences. While streaming services are struggling to avoid a subscriber plateau, traditional service providers are also facing challenges of their own, namely in maintaining their consumer dominance and creating new paths to innovation.

To meet the demands of today’s consumers, streaming services and cable companies – two previously unlikely partners – need to work together to deliver aggregated content directly to consumers, a task that one entity cannot accomplish without the other. OTT providers and Pay-TV are increasingly beginning to recognize the benefits of working together, as we saw from the recent Comcast-Netflix partnership news.

The benefits of these partnerships go both ways: it affords streaming services the ability to tap into a service provider’s reach, scale and distribution, while giving traditional providers the opportunity to provide consumers with access to desirable content in order to help retain subscribers. What’s more is that the data backs this up—a recent survey by J.D. Power found that those who added streaming services to their Pay-TV subscription were more satisfied than the “cord cutters” who relied on streaming alone.

By working together, traditional Pay-TV and OTT providers can simplify their consumer offerings and remove typical aggravations such as the need for various connections to the TV, multiple remotes, and separate subscriptions (and bills) to consume desired content. Ultimately, the benefits of these partnerships translate to more consumer choice, ease of access to new content, and a one-stop-shop for viewers to enjoy their desired content on their preferred device.

But this is only the first step—while aggregating the delivery and consumption of content brings value to both providers and customers, there’s still more to do.

It’s important for cable operators to look beyond simply adding more content and examine why streaming services such as Netflix and Hulu were so attractive in the first place. It’s because they offered a service ecosystem that was both cost effective and targeted at a niche that felt “overserved” by large cable bundles. More importantly, it allowed for flexibility on adding and removing those services; today’s customers don’t want to feel locked into a package that is mostly irrelevant to their viewing behaviors. It was that initial foray into satisfying this consumer base through a more flexible model that led OTT providers down the path of original programming, which is now allowing them to compete with the larger networks on the content front as well.

At the end of the day, consumers are looking for simplification, not only in access of the content they consume, but in how that content itself is monetized. Operators need to take notice of this trend and start to rethink how they can bundle and distribute content packages that are streamlined to new genres within the consumer landscape. For example, a millennial may be more interested in a package that includes Hulu, FX, Netflix, and AMC then they are in the standard 100 channel cable bundle.

Ultimately, it’s about reconnecting with consumers on their terms—and that means not only delivering the programming customers want by partnering with OTT providers, but also borrowing from the streaming services playbook. The Pay-TV business model needs to become more flexible and available to consumers that are already comfortable with that type of monthly subscription service ecosystem.

While adding Netflix and Hulu to the Pay-TV service ecosystem is a good start, operators must also start to think about how they adapt their approach in order to attract and retain “cord-cutting” consumers.

For more of my thoughts on why Netflix needs cable partnerships, read my recent article in Multichannel News. 

 

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Chad Dunavant

Chad Dunavant is Vice President of Product Management at CSG International.