In an effort to continue to expand their subscriber base and to create a second revenue stream, Netflix is in talks with Comcast, Suddenlink Communications and several other cable operators about integrating its streaming video service with leased set-top boxes. Obviously U.S. MVPD's have taken notice of Netflix’s new arrangement with Virgin Media and, more recently, with Sweden’s Com Hem and are weighing out the potential future impact those deals may have state side. At this point the company's mix of original series and large catalog of TV shows and movies, has essentially become a new premium subscription service that can do battle with HBO, Starz and Showtime. According to the Wall Street Journal, Netflix doesn’t have all the distribution rights it needs to offer its entire service on leased boxes in the U.S., at least not yet.
According to industry insiders, at this point in the game, Netflix would not gain much from a U.S. cable deal. The current distribution of cable STB's with IP capabilities, is very small and the overwhelming number of boxes deployed in the field today don’t speak IP (which at this point is critical to support a Netflix app). While cable operators are starting to deploy IP boxes, they will represent a fraction of the market for the near term future.
Technology aside the WSJ reports the biggest holdup between Netflix and U.S. cable companies is cable providers' fear of losing viewers of its own services and advertising. Currently they are 30 million Netflix subscribers in the U.S. alone and they will continue to access the service one way or another – via gaming consoles, retail TiVo boxes, Roku boxes and smart TVs – with or without cable’s help. In my opinion having Netflix on the set-top box would at least keep subscribers engaged with the cable video platform and prevent them toggling to a different video input and a different video device. MORE: MediaDailyNews - Netflix May Cut Deals with Cablers - 10/14/13 and Adweek - Is Netflix Looking for Cable Distribution Deals? by Sam Thielman 10/14/13