Netflix has been aggressively pursuing deals with operators to add its service to pay-TV platforms for years. While it’s been rebuffed by most of the biggest players in its home market – with the exception of Dish Network – it’s had a modicum of success internationally, with deals in Sweden, the United Kingdom, France, Belgium, Germany, Canada and, now, in Australia.
The company, during its earnings report this year, said those deals would become more of a focus in 2015, and it’s announced a pair of them so far in 2015, in Canada with Telus’ IPTV provider Optik TV, and in Australia with another IPTV provider, Fetch TV.
The Fetch TV deal is the first, but not likely the last, for Netflix in the market, where it’s set to deploy by quarter’s end.
Associating with Fetch gives it immediate access to 170,000-some customers already used to paying for content, a move that immediately will provide market share – and income – as it moves forward. Fetch TV will add Netflix to its service in New Zealand later this year.
“As we surveyed the Australian market, Netflix was impressed by the Fetch TV service, unique business model, and the committed coalition of Telco partners,” said Bill Holmes, Netflix’s head of BizDev. “By partnering with Fetch TV, we are making it easy for TV fans and movie lovers to watch Netflix on their televisions.”
For Fetch TV, Netflix “perfectly complements” the IPTV service, said Scott Lorson, CEO of Fetch TV. “We are now able to offer Australian consumers a world-class integrated entertainment offering at unprecedented value.”
When Netflix launched in Europe last year it set similar deals in motion with Deutsche Telekom, as well as with French operator Orange (where users can even pay their Netflix bill through the operator). Both helped it gain an immediate foothold in markets where it faced stiff opposition, something it also will face in Australia and New Zealand.
While the deal gives Netflix an immediate base, it also gives operators an edge on their competition.
Netflix, with 57 million subscribers globally, has created a huge reputation for itself, with a promise of quality content delivery and, a unique mix of content, an increasing amount of it original that measures up to – and beyond – content from “other” premium cable channels. And, it’s cheap in comparison.
For pay-TV operators looking to reduce churn, bundling Netflix – and other OTT content and services – directly with their own services goes a long way to keeping customers happy.
Several recent studies have posited that pay-TV subscribers are more likely to subscribe to VOD services and to be willing to pay for additional content; call them “uber-users.”
At least one survey also showed that those uber-users were far less likely to churn, or to shave their bundles.
Having Netflix onboard also gives pay-TV operators access to a generation that they have had a difficult time connecting with: Millennials (and, following in those footprints are members of the Edge Generation, who may be even more elusive).
According to comScore, nearly half of Millennials (49%) in the United States subscribe to Netflix, with a whopping 81% saying they subscribe to some SVoD service.
A PwC study, meanwhile, said pay-TV subscriptions among users 18-35 years old declined 6% in the past year. Among 18-24 year olds, 71% of respondents said they had pay-TV subscriptions in 2014, and among 24-35 year olds, subscriptions declined to 67%.
PwC numbers also support the contention that there’s a positive correlation between Netflix and pay-TV subscriptions. The researcher said Netflix subscriptions among pay-TV subscribers in each group increased; to 65% from 56% among the 18-24 year olds, and to 71% from 51% for those 25-34 years old.
Netflix CEO Reed Hastings has long maintained that the company really wants to be just another cable channel, like HBO and Showtime, for example. It just doesn’t want to be part of the bundle customers hate.
Conventional wisdom prevails, making the adage “keep your friends close and your enemies closer” even more meaningful in the coming year.
Who’ll be next to jump into a marriage of convenience with Netflix?