An Alliance With Cable Is Exactly What Netflix Needs To Survive

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For television consumers, Netflix has long been looked upon as a potential savior from the bonds of cable TV. But now they seem to be joining the enemy. If a Reuters exclusive is believed, there have been high-level talks between Reed Hastings and cable executives to bring Netflix to cable. One day, perhaps within the year, it’s entirely possible that cable subscribers will have Netflix access from their cable box.

The Reuters report speculates that this partnership would elevate the tension between Netflix and HBO. But this move, if it’s true, is much bigger than a fist fight between the two companies. It’s about the future of Netflix.

Once upon a time, Netflix was going to ride into town and free consumers from high cable bills. It was going to provide a nearly a la carte content option, something that cable providers cannot do. In lieu of live content, consumers could choose from a large, but still limited, media library for a relatively bargain price. But then big media got wind and slowed Netflix’s roll by demanding high licensing fees and short-term contracts.

Netflix is effectively at a stalemate right now.

Over the last few years Netflix’s growth was fueled by an explosion of new hardware. The company early on embraced a lot of hardware platforms and made their app a staple on every device. But now, in 2012, Netflix’s untapped market is likely depleted. Netflix needs cable nearly as much as cable needs Netflix.

Cable providers are often looked upon as massive anti-consumer machines. Comcast and others pioneered on-demand streaming in the living room but Netflix often gets the credit. By bringing Netflix into the fold, cable providers can save face and look pro-consumer for a change. Offering Netflix through their cable boxes is akin to buying innovation.

As Reuters states, the service would likely be offered for a monthly fee but a massive deal could likely be struck that would be beneficial to both companies while offering Netflix at its standard $7.99 monthly price. Netflix would also likely have to rework several of its contract deals to stream via a cable provider’s set-top box as well. These negations might delay, or even kill, the whole deal.

Unconventional cloud-based services like Netflix, Rdio, and even Steam show consumers are willing to pay a modest price for convenience. Cable is not convenient nor is it priced well. Cutting the cord is a popular anti-establishment movement. But Netflix is also in a tough spot as growth is slowing and content deals are becoming harder to sign. Netflix has a tough road ahead, though. The company is essentially dancing with several devils. They need to sign deals that are not only financially beneficial but also maintains the core values consumers have come to love and expect.