Netflix Inc. in 2016 seemed to become increasingly open to striking partnerships with other media companies, most notably Comcast Corp., with which Netflix launched a native app on the X1 Xfinity set-top box, but the companies executives said those strategies are only incrementally related to the company's consensus-beating fourth-quarter 2016 subscriber growth.
"All the partnership deals, we believe in them, that's why we're doing more of them," Netflix CEO Reed Hastings Jr. said on a Jan. 18 earnings webcast. However, he added that the growth was not a "Comcast-only story" as it came largely on international subscriptions where the X1 deal was a domestic product.
An analyst on the webcast pointed to recent comments by media mogul John Malone indicating that Netflix is looking to expand their partnerships with other MVPDs, but Hastings declined to offer any extra color on the issue, saying he would not want to speculate on future deals. He did, however, say that if Netflix does link with other distributors, it would only be those that can offer competitive modern technology like the X1 box and preserve the highest-quality experience on the app.
The analysts on the call pressed forward, asking if Netflix's presence alongside competitors on set-top box apps and digital bundles will dilute the customer engagement as viewers may be more likely to sample content from different platforms rather than staying on Netflix. The company views the X1 box and any other app bundle as an "entry ramp," Hastings said. Once a viewer is in the Netflix app, the company controls the post-play experience, guiding the viewer to other programming.
Rather than partnerships, the executives continued to attribute its success to original content and a continually improving user experience.
The platform benefited in the fourth quarter from a return of customers who dropped subscriptions after a price increase hit legacy subscribers early in 2016. At the time, the executives explained that many of those subscribers were slow to resume their subscriptions after their contracts automatically expired, but they expected many to return over time. With headline-making new series such as "Stranger Things" and "The OA" as well as returning seasons of popular shows, Hastings said many of those lost customers are now returning.
However, despite the growth, it is a long shot to assume Netflix will reach 100 million U.S. subscribers, matching the number of U.S. cable subscribers, anytime soon, Hastings said. So far, the company's secular growth has been driven by adoption of Internet TV and its lumpier cyclical growth driven by buzz around new original series. While those are expected to continue to ramp adoption over the long term, Hastings admitted that to rival cable's appeal the platform would need to add sports content.
"In terms of getting to a full one-to-one tie ratio with cable, that includes sports, which we don't have and don't have plans for," he said.
Rather the company is focused on improving the user experience and adding more premium original content, he said.