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Monday, October 14, 2013

Should Cable Operators Partner With OTT Or Syndicate Their Own?

Today's Wall Street Journal talks about Netflix's efforts to build a partnership with cable operators to place its app on the cable set top box.  For consumers it would make for easier usage; it might also lead to a more enhanced interactive menu and search screen that added Netflix programming alongside linear and on demand.  For cable operators, it could bring leverage when dealing with network contracts, offering programming otherwise blacked out on the linear network.  But there are risks too.  One that consumers bypass more expensive premium services like HBO or Showtime for a lower priced Netflix subscription.  Still if it encouraged Netflix subscribers to remain cable subscribers, cord shaving is certainly preferred over cord cutting.

But John Malone, CEO of Liberty Media has another idea.  Why partner with a competitor when we can work with our own partners to provide a streaming video service.  "Cable operators may be able to monetize TV Everywhere programming by forming a joint venture which would syndicate a product like Comcast's Xfinity TV or Hulu nationwide".  Consider too that Redbox has been in need of additional support and cable could come in as well.  There is certainly some logic to cable operators embracing a shared OTT strategy while maintaining their physical footprint for linear and on demand.  The core of such a partnership still requires a broadband line into the home and strengthens the value for the cable operators' customer base.  And the same advantages of a better onscreen search engine and simpler access across platforms can be created and offered. 

In fact, cable operators might actually have more to gain by Malone's vision of a syndicated OTT offering then by a 3rd party partnership.  Not that Netflix would not be well received by customers on a cable set top box, but that cable operators have more to lose.  Plus, the rise of other smart devices and TV sets already makes it fairly easy to access and watch Netflix programming on a television screen.  Malone sees a future where platforms converge.  He also sees the need for cable operators to continue to consolidate to better compete and gain further economies of scale.  And he might just be right.

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