Study: Netflix Integration Good for Pay TV Biz

But Netflix is ‘Less Lucrative,’ ‘More Dangerous’ Partner Than HBO
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When it comes to integrating Netflix at the set-top box level, the good outweighs the risks for MVPDs, according to a new study from IHS.

Though Netflix doesn’t provide a “meaningful” revenue-generating opportunity for pay TV operators that opt to integrate the OTT service on leased boxes, it still results in a net-positive on the operational performance of those MVPDs, IHS found in the study – Netflix on Pay TV: A Marriage of Convenience.

Per IHS, Netflix has partnerships in place with 25 pay TV providers. Examples include Dish Network and several MSOs that use a TiVo-powered platform, including Virgin Media, RCN, Com Hem, Suddenlink Communications and GCI, among others. IHS expects many more to join the crowd amid Netflix’s big global expansion.

“Many of the operators working with Netflix have seen customer satisfaction ratings improve under the partnerships, which have helped foster positive operational performances,” Ted Hall, research director at IHS Technology, said in a statement. 

Though Netflix integrations aren’t direct revenue producers for MVPDs, the tactic does help to keep consumers on the MVPD’s platform.

IHS said Netflix  plays a “likely small” role as an upsell driver to more advanced boxes for some operators, noting that this appears to be the case for 10 of Netflix’s 25 operator partners that use TiVo as their technology partner, in addition to Orange, Bouygues and Elisa.

But, the firm added, there’s some caution among MVPDs on how stitching in Netflix could impact the broader performance of their video businesses. Among the concerns – integrating Netflix could put pressure on their core channel packages and VOD offerings.

“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 added. “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.”

But forging a connection with Netflix isn’t the right move for all MVPDs, particularly those that are investing in their own movies and entertainment content, such as Sky, the study noted.

A recent study from SNL Kagan found that about 20% of U.S. pay TV subs get service from an MVPD that integrates OTT offerings, but said the net effect of those integrations remain “inconclusive.”