U.S. cable firms embrace former foe Netflix as TV viewing shifts

(Reuters) – A growing number of U.S. cable operators are forming alliances with Netflix Inc NFLX.O, a shift that is helping the streaming pioneer add customers as its largest single market matures.

No. 3 distributor Charter Communications Inc CHTR.O is expected to make Netflix available through its set-top boxes, joining more than a dozen top U.S. pay television operators adopting a model first rolled out in Europe. Some U.S. providers could start selling the streaming service as part of their Internet and video packages.

Altice NV ATCA.AS is trying that approach in France, and the company aims to extend the deal to the United States, two sources with knowledge of the matter said during the past three weeks. They requested anonymity because the discussions are private.

“Our whole model is about cooperation with many of the (streaming) providers,” Altice USA ATUS.N Chief Executive Dexter Goei told reporters in May.

Netflix also indicated it wants to take the arrangement elsewhere, though the timing of any new deals is uncertain.

“We’re now looking at proposals for including Netflix in some services and beginning to learn the bundling part of the business,” Netflix CEO Reed Hastings said during a post-earnings webcast in July. “We’re interested in expanding that.”

Additional tie-ups could help Netflix hook new users in the United States, a market analysts have said is nearing saturation while growth in foreign markets is booming. The number of subscribers is the key metric for Netflix investors, and the breakneck growth has made the company a Wall Street darling.

Netflix reported 51.92 million U.S. streaming customers as of June 30, and 52.03 million in international territories, handily beating analysts’ forecasts.

The addition of Netflix to set-top boxes helped the company top expectations for the U.S. market, Cowen & Co analyst John Blackledge said.

FILE PHOTO: The Netflix logo is shown in this illustration photograph in Encinitas, California, U.S., on October 14, 2014.Mike Blake/File Photo

The closer ties with pay TV providers represent an about-face from the early days of Netflix streaming, which started in 2007. Many in the pay TV industry viewed the digital upstart as a challenge to their longtime business of selling bundles of channels delivered via cable wires or satellites.

But as Netflix soared in popularity, distributors began concluding it was more beneficial to welcome Netflix because their customers were using the service anyway.

Cable…

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