Tomahawk, WI 9/12/2013 (BasicsMedia) – It came as a surprise to the investors and analysts when it was announced by Netflix Inc. (NASDAQ:NFLX) that it struck a deal with Virgin Media for direct access to customers through TiVo box. This deal means that the cable TV subscribers in United Kingdom would now have direct access to the streaming video services of Netflix. It is further worth noting that this is the first time that Netflix is integrated into the pay television offer.

Shareholders skeptical of success

The stock of Netflix lost around 2% with the announcement as the shareholders are quite skeptical as to which direction the company is planning to go through this deal. The company for long presented the view of a premium cable channel to provide the best online service in its markets. Investors are questioning whether this new deal to enter into the cable television services would prove successful to the company.

Brand Identity

It is commented that if this deal is only an attempting to enhance the value of video streaming service of Netflix to the international customers, then the deal would have some value to the shareholders. However, the deal proves to present some problems to the company even with this limited short term objective. The first major problem that would arise through this deal is the brand identity. While the agreement would mean that Netflix’ services would be available as part of the TV package to the subscribers, this would make the customers think it as a TV service. However, Netflix is worth much more than that and was expected that the company will effectively change the premium television forever.

Pricing

The next major problem that might result from this deal is that of pricing. Netflix would no longer be able to position itself as a complete alternative to the premium cable channels as it would now be available as part of the cable package. Under such conditions, it will be difficult to find someone to pay for the service along with the service of Virgin. It is also not possible to convince customers to subscribe to Netflix separately when its video streaming services are already available as part of the package of Virgin.

It thus means that Netflix would now be perceived as another cable channel that is available through the private cable television services of Virgin Media to the subscribers in U.K. With this deal taking Netflix’ services to UK, it is further expected that the cable TV providers in the U.S. would also enter into deal with the company to make its services available to the cable television subscribers of the country. While this would help take the services of Netflix to a huge customer base, shareholders can no more expect the company to become a strong alternative to the cable television services, as it was earlier propagated by Netflix.

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