Can Netflix Save Cable?

By Markets Fool.com

Netflix (NASDAQ: NFLX) has long been seen as the product bearing the most responsibility for the slow demise of traditional pay television.

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The streaming leader offers a cheap alternative to the bloated channel bundles sold by cable giants like Comcast (NASDAQ: CMCSA). The theory, and it has become fact in some cases, is that people would opt for a $9.99-per-month Netflix subscription, plus maybe adding Hulu and other streaming options, to replace pricier pay-TV bundles.

That made Comcast and Netflix natural enemies. The two have sparred often, with the streaming company reaching a very reluctant deal in early 2014 to pay the cable giant so its customers using Comcast's internet service would have a smooth Netflix streaming experience.

Netflix CEO Reed Hastings made it clear when he agreed to that deal that he felt it was at best a necessary evil. It was the type of negotiation that made you think the two companies would never work together willingly, but that has proven to be false.

Netflix and Comcast have partnered and it's a deal that could be good for both companies. In fact, it's an agreement that could make Netflix bigger while keeping customers from cutting the cord.

Comcast customers will be able to access Netflix without grabbing a remote to switch HDMI inputs. Image source: Getty Images.

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What are Netflix and Comcast doing?

Comcast is installing Netflix directly on its X1 cable platform. That means that customers who also subscribe to Netflix will be able to access the streaming service the same way they do any other channel on the dial.

"The Netflix integration into the X1 platform means our mutual customers will no longer need to change inputs or juggle remotes," said Hastings in a press release. "Now they can seamlessly move between the Netflix app and their cable service, enjoying all the TV shows and movies they love without hassle."

Why is this good for both companies?

Most people currently access Netflix on their television through an add-on device (like a Roku player or a gaming console) or via a smart TV. That, in many cases, means having to find the actual TV remote (rather than the cable one) to switch inputs. That's a bit of a hassle and it makes Netflix and cable two distinct either/or experiences.

By integrating Netflix into the cable experience, Comcast makes the streaming service just another add-on, like HBO or on-demand movies. Netflix becomes a value-add for the cable giant's customers, which could make them more likely to find their pay-TV subscription valuable. On the other side of the deal Netflix gets added exposure and it becomes easier to access for customers lacking a device, or unwilling to go through the hassle of switching over.

Consumers, Comcast, and Netflix win

The biggest negative for cord-cutters is having no easy way to group content. Netflix and Hulu both offer amazing content, but they are distinct platforms that can't be grouped together. Add in a few other streaming choices and you see why consumers might opt to pick a platform that lets them have everything in one place.

Adding Netflix directly to its platform gives Comcast a stronger offer for consumers. Ultimately, if the cable giant did the same with other popular streaming services while offering some lower-cost, skinny bundles, it could give the public the choice they want, on an easy-to-use platform. That could keep people from cutting the cord while also bringing more users to Netflix (and maybe other services down the line).

It's easier to watch Netflix on Comcast's X1 platform than to switch between cable and the streaming service. Consumers value convenience and this deal brings that while adding choice. It's a rare win for the companies involved and the public they serve.

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Daniel Kline has no position in any stocks mentioned. He pays for cable and pretty much all the big streaming services. The Motley Fool owns shares of and recommends Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.