Cannibalizing Premium TV?
No one's willing to say that this latest broadband video deal will accelerate a relatively small cord-cutting trend. But it could create some potential for "cord-shaving" -- that is, cause some consumers to cut back on premium cable subscriptions to the likes of HBO, Starz Entertainment LLC , Showtime Networks Inc. , and EPIX, because they can get access to some of that through Netflix.
"I think that these types of deals don't portend cord-cutting," says Will Richmond, president and founder of Broadband Directions LLC, noting that Netflix doesn't offer sports and other forms of live programming. "But cable operators should be concerned about the premium side of the business."
However, there's no data yet suggesting Netflix's premium play is directly harming sub growth at Starz, which has been offering its Web-based Starz Play" service on Netflix for nearly two years.
“Starz has not seen any empirical evidence of cord-cutting or a loss of traditional Starz pay TV subscribers as a result of the nearly two-year old Netflix affiliation relationship,” said Eric Becker, executive director of corporate communications for Starz Entertainment
And that could be good news for EPIX, which is gaining distribution thanks to Netflix but could likewise be putting some of its affiliate potential with cable-, telco-, and satellite-TV operators at risk.
Starz, by the way, ended the second quarter of 2010 with 17.3 million subs, down from 17.5 million (3 percent) in the year-ago quarter, but up by 200,000 units versus the first quarter of 2010. Extending that further out, Starz's subscriber base has remained relatively flat since it announced the Netflix deal -- it ended the third quarter of 2008 with 17.4 million subs.
And Starz has generally blamed the poor economy, rather than cord-shaving resulting from its relationship with Netflix, for any subscriber swings.
"Despite continued levels of economic uncertainty for consumers, the value proposition of our channels and services has proved reliant in the marketplace, and has driven our business performance," Starz Entertainment CEO Chris Albrecht said on yesterday's earnings call.
— Jeff Baumgartner, Site Editor, Light Reading Cable