Netflix's Latest Rival is Really a Friend in Disguise
The leading provider of premium video streaming has knocked heads with cable companies that fear Netflix subscribers will cancel their pay TV plans, Internet service providers that are slowing down its streams, and rivals offering their own digital video smorgasbords.
However, CEO Reed Hastings recently brought up a new name as a potential adversary: Aereo.
Aereo has been a small but growing disruptor to the cable and satellite television giants since it launched its Web-based service. Customers pay as little as $8 a month for online access to their local broadcast channels and a few other partners. Aereo maintains a vast fleet of dime-sized Web-tethered antennas on its end that subscribers can then access across their phones, tablets, PCs and smart TVs. In this way, allows users to record shows to the cloud if they want to watch them later, like a virtual DVR.
The method of keeping an individual local antenna for every active subscriber is how Aereo has been able to overcome legal challenges to its business model that have reached the Supreme Court. It's also why Aereo is only available in a limited number of cities - though it's expanding quickly.
On on CNBC recently, Hastings singled out Aereo as a competitor. In theory, that would pit one industry disruptor against another, but this isn't likely to be much of a fight.
When Disruptive Companies Attack
Aereo's success isn't likely to come at Netflix's expense. In fact, most industry observers see Netflix as a beneficiary of Aereo's growth. If someone decides to cut the cord -- replacing expensive cable or satellite television plans -- with Aero's limited yet substantially cheaper assortment of channels, won't that make them more likely to add Netflix? Combining Aereo for live channels and Netflix for premium ad-free content sounds like a sweet deal at less than $20 a month.
%VIRTUAL-article-sponsoredlinks%Yet the combination isn't likely to work for most families. After all, tell a sports enthusiast to give up ESPN or a "Game of Thrones" fan to fall on the sword and live without HBO. Outside of Bloomberg TV, Aereo is lean in its offerings outside of locally available networks. That is likely to change as lesser channels that aren't gaining a lot of traction offer themselves up to it as a way to broaden their audience. There is also a possibility that if the numbers of pay TV subscribers start to shrink significantly, even networks like ESPN, HBO and MTV may have to consider letting consumers pay just for the channels they actually watch. However, for now, Aereo's appeal will be limited to those who are content with cutting back to the major over-the-air networks as a way to save some serious money.
Aereo's success won't be a problem for Netflix. They will go together like peanut butter and chocolate if Aereo emerges from the Supreme Court with a victory and momentum.
Netflix will still have plenty of enemies, and they will also be Aereo's enemies. The same cable companies and broadband providers that see Netflix slurping up bandwidth and poaching TV buffs will despise Aereo for doing the same things. That's yet another good reason for Reed Hastings to consider the landscape, and realize that having shared enemies means that working together is better than working alone.
It really wouldn't be a surprise if Netflix made a play to acquire Aereo before long. Building it up as a competitor just seems like it's playing hard to get.
Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Netflix. Try any Motley Fool newsletter services free for 30 days.