Netflix cable TV idea fades, but isn't forgotten

A few weeks ago, some curious rumors about Netflix (Nasdaq: NFLX) began making the rounds. Word had it that Netflix was talking to some of the cable TV companies about the possibility of partnering with them on something like a Netflix channel for cable, or a similar endeavor.

The buzz has faded a bit since then, and no new agreements between Netflix and the cable guys have emerged, so perhaps the whole thing will go away. However, several observers have pointed out that Netflix might be able to sharply cut its customer churn rate--currently more than 50 percent annually--by becoming part of a cable TV platform.

Lillyhammer trailer Netflix

Netflix launched its first original series in February. Click here to view the trailer.

Still more interesting is what cable TV operators would have to gain, in terms of realizing some new revenue from a company that currently is taking revenue away from them--or at the very least, taking up a lot of capacity riding their networks as streaming traffic. That seems like a very good reason for the cable guys to seek out Netflix to run alongside their cable TV subscriptions, whether or not the DVD/streaming juggernaut shows interest in them first.

The idea become more attractive when you consider the possibility that Netflix could go the virtual MSO route through alternative set-top boxes or Internet-connected TVs.

Furthermore, Netflix is trying to do more of its own original programming, or at least acquire more of it, meaning it could have something different to offer cable than just another movie channel playing all the same movies.

However, cable TV distribution also would force Netflix to redefine its distribution agreements with the studios, and as we all know, the content owners do not let new distribution concepts pass without taking their piece of the action.

Financial complications aside, we probably have not heard the last of this idea.

For more:
-read this WSJ story

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