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Verizon, Netflix Quietly Test Bundled Subscription Plan

27 Oct, 2014 By: Erik Gruenwedel

Promotion marks the first time a major domestic MVPD has offered the SVOD service in a bundled subscription

The last time Netflix and Verizon appeared in the same paragraph was when the latter’s legal department last summer sent the subscription streaming pioneer a cease-and-desist letter over its use of targeted posts to subscribers alleging the telecom was the cause of their buffered video streams.

Following an exchange of angry blog volleys, the two sides hammered out a peering deal with Netflix reluctantly paying extra fees to the ISP to ensure its subs using FiOS broadband received the smoothest streaming possible.

Now comes word that Verizon is offering new FiOS triple-play customers (TV, Internet and phone) in New York a free year of Netflix with their subscription. At $9 a month, the free year is worth $108 — a marketing cost either Netflix or Verizon, or both, is absorbing.

More importantly, the trial promotional campaign marks the first time a major multichannel video program distributor in the United States is offering direct access (and free) to a heretofore over-the-top video competitor.

MVPDs — notably Comcast — have been loathe to even entertain the idea of offering easier access to Netflix to their subscribers. Indeed, Comcast was the first major ISP to “corner” Netflix into paying higher fees to ensure its subs got the fastest streaming speeds possible. A peering deal, among others, the Federal Communications Commission is now investigating.

With cable companies continuing to lose video subscribers while gaining broadband subs, the Leichtman Research Group in August reported that following the second quarter, there were more broadband subscribers in the United States than video.

With HBO, CBS and Lionsgate announcing separate plans to launch SVOD platforms (CBS did already), MVPDs in this country may be more willing to roll out the welcome mat to services such as Netflix, Amazon Prime Instant Video and Hulu Plus to retain/lure video subs.

To BTIG Research analyst Richard Greenfield, who first noticed the promotion, the campaign underscores his belief that Netflix will indeed reach 100 million subscribers by 2017 — a projection the analyst appeared to backpedal on the day after the SVOD posted softer-than-expected Q3 subscriber growth.

"Investor confidence in Netflix’s subscriber growth prospects [was] clearly shaken after Q3 results, yet as we see aggressive promotion from ISPs such as Verizon, we are increasingly confident in Netflix’s ability to achieve our [100 million] worldwide subscribers target," Greenfield wrote in the Oct. 27 post.

An update on Greenfield’s post cited a response from Verizon, which stated the promotion ends Nov. 1 and is limited to New York City and is in part due to the ISP moving to the top of Netflix's monthly ISP speed index.

“The thought is that this is a good combination to trial and a good market to try it in,” Verizon said in a statement.

However Netflix’s partnering with a major MVPD in the U.S. evolves, the practice has become more commonplace in Europe. The SVOD last year inked partnerships with Virgin Media in the United Kingdom, in addition to separate deals in Scandinavia and most recently in western Europe where it launched service in France, Germany, Belgium, Austria, Switzerland and Luxembourg.


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