Ask Netflix about cord cutting, and it’ll tell you: “It’s not happening, it’s not anything we are causing, cable and Netflix are complementary.” Then take a look at the actions of service operators, cable networks, consumers and even Netflix itself, and you’re going to see a decidedly different picture: Cable and Netflix are competing for the same eyeballs, the same money and the same TV real estate, and the fight is getting tougher by the day.
Not convinced yet? Then consider this evidence:
Consumers are ready to jump ship. Netflix users that stream the company’s videos to connected devices are twice as likely to at least downgrade, if not outright cancel their cable TV subscription than they were just a year ago, according to a new study from The Diffusion Group (TDG). Thirty-two percent of these Netflix users are thinking about calling their cable company. “Despite its rhetorical positioning, both Netflix and Pay TV operators have long been aware that there will come a point at which its services are not only dilutive to regular TV viewing, but antithetical to Pay TV subscription levels,” said TDG’s Michael Greeson. In other words: In the long run, Netflix will inevitably lead to cord cutting.
Content licensing is getting more competitive. Netflix Chief Content Officer Ted Sarandos revealed recently that Netflix is now at the table for pretty much any TV licensing deal. So why aren’t Netflix customers buying more content? Because some of the networks simply don’t like to share. Netflix would prefer cheaper, non-exclusive licensing deals, which would make it possible to get more bang for its buck. However, HBO and increasingly Showtime are insisting on exclusive content to prevent subscribers from jumping ship.
Many observers thought Netflix wanted in on this game when the company bought the rights to its first-ever exclusive show House of Cards this spring. Sarandos, however, said that it was exactly the other way around: Netflix was getting concerned that it would get shut out of too many deals for attractive serialized content, which is increasingly going exclusively to programmers like HBO, so it saw itself forced to act.
Cable companies castrate their TiVos. A number of cable companies now offer their customers TiVo-branded DVRs that offer access to all kinds of additional online content. But TiVo users who buy their devices at retail will be able to watch videos from Netflix and Hulu Plus with these machines, while customers who rent the same DVR from their cable company won’t have access to these two services. The logic? Netflix could get people to ditch their premium channels and ignore cable VOD.
Netflix is dominating every screen. Network operators are trying to bring TV everywhere, but they often must feel like the hare racing the porcupine: Wherever they look, Netflix is already there. The company’s service is now available on more than 250 devices, and Netflix is getting more aggressive about dominating every single screen. The latest ploy is a dedicated Netflix button on your remote control, which puts it in direct competition with your cable guide. That raises the question: Do you want to browse through thousands of channels, or simply access Netflix?
Incumbents are putting a cap on it. If you’re a network operator, how do you keep your customers from canceling premium pay TV services to watch everything online? Canadian ISPs seem to think that bandwidth caps are the answer, and they’ve been enforcing strict data diets for years. ISPs that charge consumers up to $2.50 per GB once they exceed caps as little as 2 GB per month have been a real problem for Netflix north of the border, forcing the company to default to SD-quality streaming for all Canadian customers.
There’s been some movement with regards to bandwidth pricing in Canada in recent months
, but the conditions are telling: Shaw recently introduced generous 1TB caps and even unlimited data plans, but those are reserved for customers who have a pay TV subscription as well. Bandwidth caps in the U.S. are generally higher, but not really that generous either, especially if you’re a heavy Netflix user.