When you think of Netflix (NASDAQ: NFLX) and Comcast (NASDAQ: CMCSA), you most likely see them as rivals. And you wouldn’t be wrong… video streaming has been threatening cable providers since “binge watching” became a cultural norm.
Which probably makes it hard to believe that this unlikely duo just partnered up.
The basis of both of these companies is essentially pretty similar… they both provide video entertainment (TV shows, news, movies, documentaries, etc.) to customers, but they do it in two different ways…
Netflix allows for a more user-controlled viewing experience — as a viewer, you can decide when you want to stream your preferred video content and for how long. You can watch entire TV shows in one day, or not — unlike Comcast, where there’s a set schedule for when certain movies or TV shows will air.
In regards to price, Netflix’s $9.99-per-month subscription has obviously been a better choice compared Comcast’s pricier pay-TV bundles.
Netflix’s subscription prices are extremely affordable, and it’s the biggest incentive for customers to finally cut ties with cable providers. Paying $100+ a month for a service with channel bundles that you rarely watch just doesn’t make sense anymore.
In July, Comcast and Netflix announced that Netflix will be coming to Comcast’s X1 platform.
After four short months, that time has come — next week will launch the first-ever integration between cable and one of the most popular video streaming services.
Netflix customers will be able to search and browse programming alongside live and on-demand programs through Xfinity TV subscription. Current Comcast customers who aren’t Netflix subscribers will be able to sign up through their cable box and have it added to their bill.
While on the surface it seems like this deal was meant to save cable, in reality, it’ll be a deal that’ll benefit both companies.
It’ll bring newer customers to Netflix through current Comcast subscribers. It’ll also give current Comcast customers an incentive to hold off on cutting the cable cord.
Comcast has 22.4 million TV subscribers, and the deal will affect half of those subscribers who’ll be on the X1 platform by the end of 2016.
In a press release, Netflix co-founder and CEO Reed Hastings said:
The Netflix integration into the X1 platform means our mutual customers will no longer need to change inputs or juggle remotes… Now they can seamlessly move between the Netflix app and their cable service, enjoying all the TV shows and movies they love without hassle.
Comcast’s X1 platform will give subscribers access to their Netflix accounts without any additional third-party hardware like an Apple TV, Roku player, Chromecast, or some type of gaming console, providing a fully integrated and easy experience. An added feature to the X1 platform will be its voice-activated remote that’ll understand voice commands to easily turn on Netflix.
This deal comes at a perfect time for Netflix. In July, the company was really feeling the pressure when its stock was downgraded because it was unable to meet new subscriber targets — it missed by more than 30%.
With recent increases to subscription costs, potential Netflix customers need more ways to interact with the service to justify the costs — to feel like they’re getting what they’re paying for.
The Deal’s Benefits
According to John Blackledge, an industry analyst at Cowen and Company, a partnership with Comcast could help Netflix sign up an additional 5 million subscribers in the U.S. Not to mention, the partnership with Comcast will guarantee adequate Internet speeds and network access that’ll efficiently provide reliable service to customers.
Netflix has a lot to gain from this partnership, like increasing its subscribers and maintaining its strength over the online streaming market. Additionally, it’ll help Netflix focus on expanding internationally as the U.S. growth rate slows down.
But it’ll also give Comcast subscribers a reason to stick around. Netflix is doing a great job with providing exclusive and original content — especially original series like Narcos and House of Cards. Customers will start to see Comcast’s bundles with more value now that it’ll include Netflix’s original content.
All in all, this partnership will benefit both companies. Since the announcement on Friday, November 4th, Netflix saw a 2% price increase, and Comcast saw a 2.6% increase.
The deal will create allies out of two strong companies that were once considered enemies.
Until next time,
Jennifer Clark
Pro Trader Today