San Francisco: Netflix's Internet video service is about to join the programming lineup of three small cable-TV providers in the US, a breakthrough that acknowledges the growing popularity of online entertainment. The agreements with Atlantic Broadband, RCN Telecom Services and Grande Communications gives Netflix's subscription service a channel on the TiVo boxes that the three cable services provide their customers. Netflix will debut on Atlantic and RCN on Monday and then will expand on to Grande's service by end of next month. Collectively, the three cable-TV services have about 820,000 subscribers scattered through nine states and Washington D.C.
Although that's a small fraction of the cable-TV market, the deals represent another milestone for Netflix Inc. as it tries to make its Internet video service more like premium channels such as HBO and Showtime. Netflix already had landed spots on the cable-TV boxes of services in England, Denmark and Sweden, but hadn't been able to make similar inroads in the U.S. until now. The company's nearly 36 million US subscribers typically have to buy a separate device, such as video game console or a player from Roku or Apple Inc., if they want to stream video on to their TVs. That method usually requires a separate remote and an additional step to flip over to a different TV input to see the picture.
Now, Netflix will be like any other channel on the cable-TV dial except that it relies on a high-speed Internet connection to deliver its video. "We think this signals a new generation of cable-TV service of offerings," said David Isenberg, Atlantic's chief marketing and strategy officer. "It's a watershed moment." Netflix has been striving to become more HBO-like since it expanded upon its DVD-by-mail service and began offering Internet streaming seven years ago. In the past two years, the Los Gatos, Calif., company has been featuring more original programming, such as the critically acclaimed "House of Cards" and "Orange Is The New Black," to persuade more US subscribers to pay $8 per month for its service.
To help pay for its rising programming costs, Netflix plans to raise its prices by $1 or $2 by July. The higher prices initially will only affect new customers. HBO, which is owned by Time Warner Inc., views Netflix as such a competitive threat that it has steadfastly refused to licenses its old TV shows, such as "The Sopranos" and "The Wire," to the Internet video service. Those HBO shows instead will be streamed through a rival Internet video service offered through Amazon.com Inc.'s Prime shipping service as part of deal announced earlier this week.
"HBO fears Netflix's growing industry power," BTIG Research analyst Richard Greenfield wrote in a Thursday blog post. "We suspect HBO wanted to balance Netflix's growing media industry hegemony by helping to bolster their largest direct-to-consumer competitor — Amazon."
Unlike their partnerships with HBO and Showtime, the cable-TV providers aren't offering a Netflix subscription as part of their bundled packages. People will still have to open a Netflix account through the company's website or mobile application, although Atlantic is trying to make that process easier by offering a way to sign up on the TV screen.
Netflix is still hoping to be added to the programming lineup of a major cable-TV service. It seems unlikely that Netflix will make its way onto a cable box offered by the biggest service, Comcast Corp any time soon. The relationship between the two companies has grown frosty because Netflix is opposing Comcast's proposed $45 billion purchase of another major cable-TV service, Time Warner Cable Inc.
RCN Telecom has 440,00 subscribers in Washington, D.C., Philadelphia, New York City, Boston, Chicago and Leigh Valley, Pa. Atlantic, which is owned by Canada's Cogeco Cable, has 230,000 subscribers in western Pennsylvania, Maryland, Delaware, Miami Beach, Fla. and Aiken, S.C. Grande has 150,000 subscribers in Texas.
