Economy

Netflix nears 100 million subscribers: Why that doesn't mean the end of cable TV

The expansion of Netflix is changing how audiences want to watch their favorite shows and movies. But it has also led to surprising partnerships between Netflix and cable and cellphone companies it once battled. 

The Netflix logo is displayed on a tablet in North Andover, Mass. Netflix expects to reach 100 million global subscribers by mid April.
Elise Amendola/AP/File
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Netflix is on the verge of reaching a major milestone: 100 million global subscribers.

But this mark is not simply evidence of the precipitous decline of traditional pay-TV, say analysts. It is also testament to how the streaming service, around since 2007, has forever altered audiences’ expectations in the United States and abroad, as Netflix has turned video on-demand across devices – on televisions, tablets, and smartphones – into a prerequisite, not a bonus, that upstart streaming services and conventional cable operators must live up to.  

“The linear way of watching TV or content is becoming a thing of the past,” says Rahul Telang, a professor of information systems and management at Carnegie Mellon University’s Heinz College in Pittsburgh, who specializes in the digitization of the media industry. “The innovation of [over-the-top content] means that every player in the market has to respond to it.”

One unusual response has been a partnership between Netflix and some telecom companies it once battled with publicly. In both the United States and France, Netflix has partnered with some cellphone and cable carriers to expand the footprint of its original programming, while giving these more traditional companies a leg up over the competition. 

Bolstered, in part, by these partnerships, Netflix projects it will reach the 100-million mark this weekend, the company said in its release of its first quarter earnings on Monday. Netflix ended March with 98.7 million customers in about 190 countries, adding roughly 5 million subscribers during the first three months of 2017.

It’s “a good start,” said Netflix chief executive Reed Hastings in a letter reviewing the company’s first-quarter results.

The fifth season of Netflix original and hit show "House of Cards" will launch in May, with Netflix predicting it will add 3.2 million more subscribers in the seasonally slow quarter. Perhaps more important, however, is Netflix’s subscribers abroad will likely surpass its American subscribers for the first time this year, predicts Michael Olson, an analyst for Piper Jaffray. About 51 million of Netflix’s subscribers are in its home market of the US, while almost 48 million subscribe outside of it.

Part of its overseas success has been propelled by partnerships with foreign cable and cellphone carriers. The first of these major deals was with the French cellphone and cable company, Orange. After finally reaching an agreement in late 2014, the deal gave the 10 million Orange customers a one-month trial of Netflix and the ability to sign up for a Netflix subscription by paying through their existing monthly cellphone contracts. Other deals across Europe, Latin America, and Asia – where the California-based company has expanded its streaming reach – could soon follow, according to The New York Times.

To add to its international appeal, Netflix also started to produce original content abroad beginning in 2015. Among these series were the French original production, "Marseilles," and the Japanese original production, "Hibana." 

“Netflix wants to be exposed to as many people as it can,” Tom Harrington, an analyst at Enders Analysis, a media and telecom industry research company in London, told The New York Times. “Telecom operators want to keep people inside their walls, so they are willing to let Netflix in.

And now Netflix is honing in on securing those same kinds of partnerships in the US.

Netflix has partnered with Comcast, the country's largest cable operator, to bring Netflix originals like “The Crown” and “House of Cards” to cable subscribers. The agreement became official in November, when the once publicly feuding companies added Netflix to Comcast’s new X1 platform, as USA TODAY reported. The service is included for Netflix subscribers, and Comcast customers who do not currently pay for Netflix can sign up over the X1 system and be billed monthly by Comcast.

Not only has this partnership extended Netflix’s reach, it has also helped Comcast tick its subscriber rates upward for the first time in almost a decade, a welcome trend as more and more viewers seek to cut the cable cord.

Even though Netflix is the world's biggest paid video service, 100 million subscribers will still rank it behind HBO, the popular pay-TV channel. HBO has 134 million subscribers worldwide, including viewers who pay for an internet-only version of the channel that was inspired by Netflix’s success.

But the rise of Netflix and other streaming services, as well as websites like YouTube, has also created more of a demand for more content, expanding the number of shows, movies, and video clips available to audiences, says Dr. Telang at Carnegie Mellon University.

“The pie is increasing. There is more capacity for everybody to grow,” he says. “What you’re seeing is multihoming,” he continues, referring to households that subscribe to streaming services like Netflix and Hulu as well as cable subscriptions. “They’re consuming all three of them.”

This report contains material from the Associated Press and Reuters.

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