Oct. 15 (Bloomberg) -- Netflix Inc., pressing cable operators to grant equal footing to its Web-based films and television shows on their pay-TV systems, is getting an assist from set-top box maker TiVo Inc.
Netflix, the world’s largest subscription streaming service, is in discussions with U.S. cable-TV providers to add its application to their set-top boxes, people with knowledge of the situation said. The change would let viewers search for its content without having to switch to a different device like a video-game console or Apple TV.
TiVo’s role is key to the Netflix effort because the company, the pioneer of digital-video recorders, makes set-top boxes that are already installed in the homes of cable-TV customers across the U.S. TiVo is introducing advanced technology that integrates cable programming with Internet services, a potential boon for Netflix’s $7.99-a-month product.
“TiVo has been on a course of implementing that for cable operators,” Tom Rogers, TiVo’s chief executive officer, said in an interview yesterday. “We’re very supportive of bringing Netflix into the fold so that can happen.”
Cable systems can integrate online and TV better than any other platform and doing so is key to the industry’s future, Rogers said. For Netflix, forging ties with cable providers could fuel expansion by putting its Web-based programs alongside traditional TV shows.
While Netflix has discussed partnerships with Comcast Corp., the biggest cable company, and other players, those furthest along are regional providers that rely on boxes from TiVo to blend traditional TV programming with Web.
TiVo customers negotiating with Netflix include Cox Communications Inc., Suddenlink Communications, RCN Telecom Services and Atlantic Broadband Finance LLC, said the people, who asked not to be identified because talks are private.
San Jose, California-based TiVo began shipping new set-top boxes in recent months with faster processors that let users load Netflix’s service more quickly. Atlantic Broadband, owned by Montreal-based Cogeco Cable Inc., is the first U.S. provider to deploy its most advanced set-top box, called Roamio, Steve Wymer, a TiVo spokesman, said in an e-mail.
Older installed boxes may be upgraded late this year or early in the first quarter of 2014 to include search results in one place, Wymer said. He declined to discuss any plans that involve Netflix.
Atlantic Broadband, the 12th largest U.S. cable operator, wants to offer Netflix alongside services like Time Warner Inc.’s HBO and CBS Corp.’s Showtime, said David Isenberg, chief marketing and strategy officer, who declined to comment on the specifics of any talks or timeline.
“The ideal for us would be to provide Netflix to our customers in the same manner we do other programming,” Isenberg said in an interview. “What that means for Netflix is they have an opportunity to grow their subscriber base with zero acquisition cost and likely reduce churn. For us, we have folks that want it all, and we see Netflix as complementary to our standard service offerings.”
Cable One, a pay-TV service owned by Washington Post Co., is also interested in talking with Netflix, according to Rima Calderon, a spokeswoman.
Netflix fell 0.8 percent to $321.69 at the close in New York. The shares have more than tripled this year, for the best performance of any S&P 500 stock. TiVo added 0.3 percent to $12.56, bringing its gain to 2 percent for 2013.
Sweden’s Com Hem and Virgin Media, a U.K.-based unit of Liberty Media, recently said they would offer Netflix as part of their rollout of TiVo set-top boxes in Europe. Under those deals, people still would have to sign up for the streaming service, and Netflix would control its own billing.
In addition to the smaller U.S. cable players, Netflix is in talks to form partnerships with the four biggest U.S. players -- Comcast, Time Warner Cable Inc., Cox and Charter Communications Inc., according to the people. The earliest announcements are weeks to months away, they said.
“We’re rapidly moving to an environment where every device in the home, including the big TV will be connected to the Internet,” said Alex Dudley, a spokesman for Charter. “Charter is open to a myriad ways of enhancing the customer experience with that technology.”
One obstacle in negotiations is Netflix’s Open Connect streaming platform, designed to deliver smoother, clearer pictures to cable homes at lower costs. Netflix wants to locate storage equipment in or near cable companies’ networks. Some large cable operators have balked at using Open Connect, saying it sets a precedent that could make negotiations with other Web content companies more difficult.
Suddenlink was acquired last year for $6.6 billion, including debt, by BC Partners Ltd., Canada Pension Plan Investment Board and a management team led by Jerry Kent. The St. Louis-based company -- the seventh-largest U.S. cable operator -- has about 1.4 million customers in states such as Arkansas, Louisiana and North Carolina.
Cable companies are changing their attitudes about partnerships with services such as Netflix as they confront the reality of Internet-delivered content, said Andy Hargreaves, an analyst with Pacific Crest Securities in Portland, Oregon.
One big change, Hargreaves said, is that pay-TV providers are starting to understand they can’t expect Netflix to offer them some of its subscription revenue. Instead, they can use Netflix as a tool to promote broadband service.
“Consumers like Netflix and they like cable, and they like them more when they can access them both easily,” Hargreaves said.