Netflix (NASDAQ:NFLX) is well past merely being a household name in the U.S., and it's starting to reach that same degree of ubiquitous popularity in many other countries too. That's great for the business and shareholders, but it does mean that the streaming service has had to come up with more creative ways to reach out to those people who haven't already signed up.
One of its most successful recent strategies on that front has been to bundling itself with a partner. Earlier this year, Netflix announced its first such bundle with a U.S. cable operator: Comcast (NASDAQ: CMCSA). The deal gives customers the convenient option of paying for both Netflix and Comcast on one bill.
On its latest earnings call, Netflix said that bundling will be a big part of its long-term growth strategy.
Netflix's bundling strategy proves lucrative
The new option makes it easier for people to try the service out for a few months, CPO Greg Peters said on the latest earnings call. By allowing them to add it to their cable bill like a premium channel, Netflix can reach people who are less tech-savvy, or who might be less familiar with the streaming service, he said.
Most "digital natives" have already signed up for one or more streaming services by now -- or they've at least heard of them. But now Netflix is rapidly growing its brand among the folks who aren't part of this group of tech-savvy early adopters. That's good news, because it shows that Netflix still has room to grow in the U.S. despite the fact that the market is highly saturated. In the past quarter, Netflix added 1.09 million net new subscribers in the U.S., bringing its total to 58.5 million, including those on a free trial period. That's nearly half of all U.S. households.
Netflix has found success partnering with legacy entertainment companies. For example, RCN Telecom Services, a regional cable, phone and internet provider, lists Netflix among the other channels in its on-screen guide: Its customers can start their one-month free trials of the streaming service with a simple click of the remote. Last year, RCN said that more than 80% of its customers who test-drive Netflix become subscribers.
And the company has taken its partnership strategy global. In March, Netflix announced it was partnering with U.K.-based pay-TV broadcaster Sky TV to bring a package deal to European markets. This means customers will no longer have to flip back and forth between separate apps or streaming devices to switch from Sky's content to Netflix's. Again, making things as easy as possible for subscribers and potential new customers is the underlying theme.
What TV providers get out of the Netflix bundling strategy
Netflix may be the big dog in the television content game now, but its partners still wouldn't be playing nice if they weren't getting something meaningful in return. By giving their customers easier access to the top streamer's offerings -- and by linking the two services in people's minds and bills -- they doubtless hope to stem the cord-cutting trend.
Pay-TV providers of all stripes must be watching the growth of OTT video services closely. In the U.S. alone, the number of OTT video service viewers is expected to rise by 11.1% to 170.1 million this year, according to a recent report from eMarketer. That's 51.7% of the total U.S. population. And of those viewers, 86.8% will use Netflix at least once a month.
Netflix's ability to get pay-TV providers on its side is just another indication of its growing power in the marketplace. It seems everyone wants to hitch their wagons to its still rising star. And Netflix is willing to share that success with others -- so long as it gets something in return.