Sky convinces Netflix to do the thinkable: move titles off its platform

Having initially announced a tie-up earlier this year, Sky has somehow managed to convince Netflix to loosen the grip on customer experience, integrating its biggest titles into a very chunky on-demand package.

As part of the partnership, Netflix content will be hosted on the Sky platform, allowing customers to access a huge number of on-demand titles without having to navigate between different streaming apps. Having to navigate through different windows to find the right content can be a frustration for consumers which Sky is certainly addressing, though it does seem to contradict the Netflix ambition to standardise customer experience across all platforms and partnerships.

Across one page users will be able to navigate through Sky’s content such as Patrick Melrose and Tin Star, HBO’s Game of Thrones, Showtime’s Billions and now, Netflix titles such as The Crown, Stranger Things, The Kissing Booth, Making a Murderer and Queer Eye. It’s a lot of quality content for one place, cementing Sky’s position as the UK’s king of content.

“Sky wants to position itself as an aggregator of services as underlined by recent tie-ups, bringing services together is to be offer users a seamless and integrated service experience,” said independent telco and tech analyst Paolo Pescatore. “Therefore, the move further increases Sky’s own value as a one stop shop provider. More importantly it will also get access to Netflix’s catalogue and metadata which will prove more attractive to Disney.”

“Europe lags the US when it comes to cord cutting due to numerous reasons. Among other things the pay TV penetration is a lot lower in Europe and has been dominated by a handful of players. However, both regions are seeing huge growth in binge watching driven by changing user behaviour towards on demand programming.”

The mega on-demand deal will cost £10 a month, alongside a Sky Q subscription, with a 31-day rolling contract available as an option. It might be more expensive than a normal Netflix subscription, but with Sky’s box set content available for £5 a month, professional bingers will be able to save money combining the pair.

While this is a massive coup for Sky, it is a strange turn of events for Netflix. Last week at IBC 2018, Maria Ferreras, VP of EMEA Business Development at Netflix, stated that while the business was open to partnerships the experience would remain consistent across all platforms and partnerships. In allowing Sky to host its programming on its own content platform, Netflix has essentially handed over the management of customer experience. It’s an interesting announcement with Ferreras insisting maintaining a high-quality and standardized experience across all platforms was critically important for the business.

That said, another ambition of the business is to make its content as accessible as possible. Improving accessibility is one aspect of the strategy to secure additional subscriptions as the growth rate looks like it is beginning to wobble. Perhaps this is simply a compromise. As growth momentum slows executives have to make difficult decisions, some of which they will not like, and maybe this is one. The drive for new subscriptions seems to outweigh owning the customer experience.

Now before anyone gets too excited about this being a possibility for every content platform, this will probably not be the case. Ferreras highlighted last week that each partnership is weighed on its own individual merit. There are frameworks in place to guide the parameters of each relationship, though the end product will entirely depend on who is sitting on the opposite side of the table.

Taking this an example, Netflix might have been happy to hand over the customer experience management because Sky has an excellent content platform which it has spent years honing; it is a solid experience with content easy to find. Others cannot say the same, take Virgin Media for example. We cannot imagine Netflix would allow a similar integration of content due to the cumbersome nature of the TV offering.

The search for new subscriptions will certainly take Netflix into some interesting partnerships. After the last quarter’s results, were subscription growth looked to stagger, there might be more pressure for executives to loosen the stranglehold on the platform, and be more flexible when it is discussing partnerships. Netflix still has the upper-hand when it comes to negotiations, though if it wants to maintain its lofty market cap ($152 billion!!!) it will have to be more pliable. Offering more access to its valuable customer data and behaviour insight could be one of those areas.