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Virgin Media Offers Netflix to Subscribers

9 Sep, 2013 By: Erik Gruenwedel

It marks the first time the pay-TV operator bundles subscription streaming pioneer — and competitor — in test content offering to select subs

Virgin Media Sept. 9 said it will begin offering Netflix to its 1.7 million pay-TV subscribers in the United Kingdom. The offering marks the first time a cable operator is making available an over-the-top streaming service to its subscribers.

Virgin Media, which is owned by U.S.-based Liberty Global, in a statement first reported by Bloomberg, said it would roll out the offering (which requires a separate Netflix subscription) to 40,000 subscribers using TiVo set-top boxes, with further expansion thereafter.

Subs would be able to search for Netflix programming using the same software to locate pay-TV content.

“We’re delighted to be bringing yet another groundbreaking service onto TV screens in millions of Virgin Media homes,” Virgin Media COO Dana Strong said in a statement.

The news sent Netflix's stock to record highs above $311 a share on Sept. 10 in mid-afternoon trading.

Netflix, which is currently available as a standalone service in the U.K. and Ireland, has made no secret it is open to the idea of bundling its service with multichannel video program distributors.

CEO Reed Hastings hinted as much during a 2012 Morgan Stanley Technology, Media & Telecom conference in San Francisco. He said such an offering would likely only occur in several years. The CEO said he wouldn’t be opposed to a scenario whereby Verizon included Netflix as add-on to its FiOS TV fiber-optic platform as long as consumers knew the streaming service was Netflix and not a co-branded service.

Verizon operates a digital partnership with kiosk vendor Redbox.

The primary concern about SVOD among MVPDs is that subscribers might opt to cancel bundled channel offerings for lower-cost streaming. Virgin Media’s apparent indifference suggests it is more interested in gaining high-speed broadband subscribers — a prerequisite of streaming.

“It’s the first time Netflix has ever been added to an operator box,” Steve Wymer, a spokesman for TiVo, told Bloomberg. “It’s a big deal, especially if it busts open the gates for operators globally to integrate streaming.”

Bundled SVOD with cable or satellite is not entirely a foreign concept, according to The NPD Group, which found strong consumer interest for the idea in a 2012 study.

In a survey, 59% of respondents said they wanted a single source for their pay-TV, VOD and SVOD selections.

“While roughly a third of pay-TV subscribers are also using Netflix, it means the pay-TV provider [that] owns the remote and billing relationship could accelerate adoption of VOD, including electronic sellthrough, transactional VOD [and] iVOD, as well as SVOD,” said Russ Crupnick, SVP of industry analysis with NPD.

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