Cable operators settle on new strategy to combat streaming services

Bloomberg

Cable companies are settling on a new strategy to combat streaming services like Netflix and Hulu: If you can’t beat ’em, join ’em. Comcast Corp. and Charter Communications Inc., the two biggest US cable operators, are in talks to offer Hulu’s on-demand service through their set-top boxes, according to people with knowledge of the matter.
Comcast, the largest cable operator, already offers Netflix, YouTube and Dish Network Corp.’s Sling TV via its X1 service, which helps subscribers find shows and movies by voice-activated search using their remote controls. Giving customers seamless access to Hulu’s catalogue moves Philadelphia-based Comcast a step closer toward its goal of becoming a one-stop shop for a variety of digital video services.
“That’s the biggest role of a distributor—how we’re able to offer all these choices on one platform,” Matt Strauss, a Comcast executive vice president, said at an industry conference. “To a customer, these are just choices and you shouldn’t have to switch inputs or figure out how to get to that choice.”
Charter also plans to add Netflix in a new user interface that integrates web video, and may add others, a person familiar with the matter said. Altice USA, the fourth-largest US cable provider, is also in talks with Netflix, according to another person, who asked not to be identified discussing private deliberations.
Altice already features YouTube videos and Pandora, the streaming music service, on its new Altice One cable system.
Pay-TV companies once viewed streaming services as existential threats to their business, enabling users to watch popular TV shows on demand without paying for a cable or satellite package. Comcast has tried out usage-based pricing, which charges internet customers extra if they stream over a certain amount.
Those early misgivings have been outweighed by cable companies’ need to stay relevant. Consumers are watching videos throughout the day with little regard for whether they originate on the internet or TV. The screen that cable subscribers see is evolving from a grid listing hundreds of channels to a slick interface resembling an iPhone or tablet screen, with tiles featuring various apps. Adding an app from Sling TV to that homepage can give customers foreign channels they might not otherwise get.
Cable operators also say many of their subscribers already stream videos from Netflix, Amazon and Hulu. And even when customers watch online video instead of traditional cable, they’re using the pay-TV companies’ high-speed internet services to do it, so they’re not a total loss.
By helping customers avoid the hassle of juggling remote controls or toggling between applications, the cable companies are hoping to appeal to a web-savvy audience and hang on to more customers. Comcast is also testing an app that lets subscribers access their cable service through Roku Inc.’s set-top boxes.
“The pain of switching between inputs, trying to download apps, or going app by app to search for content will no longer be friction points,” Barclays analyst Kannan Venkateshwar said in a note earlier this year describing Comcast’s strategy.
While adding an app may seem easy for a cable company to do, the negotiations are complex, covering issues such as how to split revenue from new subscribers and who has access to viewer data.