Netflix Gearing up for Cable Partnership: How Will It Work?

Netflix is in talks with major cable companies over potentially adding the popular online streaming service to cable boxes, Reuters reported.

Reed Hastings, the Chief Executive of Netflix has privately met with cable companies to discuss adding Netflix as an on-demand option on cable services, three sources close to the matter told Reuters.

Hastings has hinted at joining forces with cable companies before, potentially posing a threat to the $100 billion a-year business.

It's not in the short term, but it's in the natural direction for us in the long term, said Hastings, speaking at an investor conference last week. Many (cable service providers) would like to have a competitor to HBO, and they would bid us off of HBO.

Even though Netflix's $7.99 monthly streaming service offers older movies and TV shows, it has still been seen as a threat to more expensive on-demand movie channels that are offered by cable companies.

Cable giant Time Warner Inc., has dismissed that Netflix will pose a threat to cable companies. Jeff Bewkes, the company's chief executive famously equated the Netflix service to the Albanian Army, according to Reuters. Although, more recently he has been looking more positively towards the company.

How Will it Work?

Even if Netflix strikes a deal with cable companies by the end of the year, it could take months for the service to launch because Netflix has to re-work its licensing deals, which currently doesn't cover cable coverage, according to the Reuters.

If Netflix is eventually streamed through a cable package, users could avoid potential rising costs in online traffic. Time Warner Cable is the first cable company to experiment with charging users for the amount of bandwidth they use. A pilot project is being carried out in Texas, according to Reuters.

Competition

Comcast Corp has launched its own online video service for subscribers, which currently stands as Netflix's biggest rival, especially if it decides to enter the cable market.