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3Vision Insight - Netflix on Virgin Media TiVo

05 Feb 2014
3Vision Insight - Netflix on Virgin Media TiVo

From November 2013 Virgin Media’s TiVo subscribers have been able to access Netflix’s UK service directly from their set-top-boxes. 3Vision looked at the reasons behind this and how it has developed over the last few months

The addition of Netflix to their TiVo set-top-box was a landmark deal, representing the first example of a major Pay TV operator integrating Netflix with their own service.

Alongside Virgin Media’s current on demand offer, including their own transactional Virgin Movie service, Sky Movies on demand, UK broadcaster catch-up services, Picturebox and other channel related services, subscribers can now access the thousands of hours offered by Netflix.

This is significant in terms of Pay TV providers welcoming OTT challengers. Although in the US some cable operators have welcomed Netflix this has been by positioning their high speed broadband product as a great pathway to a better Netflix experience.

Virgin has been the first to add Netflix to their set-top-box, and more interestingly the first to fully integrate in to the Pay TV experience.

Virgin has 3.8 million TV subscribers (Q3 2013) with 1.8 million TiVo subscribers - almost 50%.

Virgin do not sell or bundle Netflix, but they are offering six month gift subscriptions to Netflix for new and re-contracting customers of their triple-play bundled offer (Collections). By combining Netflix with Collections this is supporting acquisition, retention, and up-sell activity.

The TiVo business case has been challenged in the past, with Virgin funding the rollout of an expensive STB, but the indirect benefits they are pushing are further emphasised with Netflix.

The impact of Netflix will not be limited to these indirect platform benefits. Whilst not disclosed, there is no doubt from Netflix’s desire to do these deals that Virgin will be rewarded in the commercials.

Virgin’s UK market position is important context, with little or no control over the premium content market they have little to lose welcoming services that are challenging the dominance of their competitor Sky. As historically, Virgin have been weak at reselling Sky’s premium movie service (with 22% subs taking Sky Premiums at the end of 2012).

Whilst understanding the fragmented nature of the global set-top-box marketplace Netflix themselves state they want more of these deals, simply suggesting “…as a general rule, we’re happy to support devices from other providers as long as we get application placement commensurate with our popularity”.

Netflix knows the importance of device integration, and connectivity to the TV screen in the home. As growth slows in each of their new markets, the importance of being available easily via the primary viewing device in the home will increase. Being fully integrated into the user’s TV viewing habits in the home will be a boost for Netflix, and market by market how this can be achieved will vary depending on the players involved and each of their strategic imperatives. But as churn and acquisition become bigger issues for Netflix, their positioning in the mind of their consumers will grow in importance.

How does it work…

Netflix is available to watch through the TiVo box in the same way as other TiVo video service Apps such as the BBC iPlayer, with Virgin Media subscribers requiring a Netflix subscription.

Existing Netflix subscribers simply log on to the service with their current Netflix membership details and those who aren’t subscribers, can either sign up through the App or via the Netflix website (with all billing directly with Netflix).

Whilst users can simply access Apps & Games from the Home Screen and then enter Netflix, it is significant that Netflix content will also be presented throughout the users guide experience. With content options returned in search results, and appearing in the Discovery bar (the promotional bar across the top of the guide screen).

Nascent services in Pay TV have historically struggled when they are difficult to find and require conscious effort above the users natural TV behaviour. Virgin’s TiVo customers are strong TV viewers, and the more impacts Netflix achieve on these viewers as they go about their daily TV usage the more they will benefit.

It will be interesting to see longer term whether this does more to improve Netflix’s customer acquisition or retention.

For the full insight, please get in contact with us.

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