When two companies are competing for the same customers, usually they don't start cooperating to help each other out, right? I wouldn't expect McDonalds to start selling Whoppers anytime soon. That's what makes a recent partnership between Verizon and Netflix so unlikely. Verizon is a cable provider, among other things, and Netflix is one of the top cord-cutting services hurting its business.
Verizon (NYSE: VZ) is taking a different approach, though, adding Netflix (NASDAQ: NFLX) - the primary culprit in cord-cutting - to select triple-play bundles. Verizon will offer new FiOS subscribers a free year of Netflix with a two-year agreement.
The bundle was only offered on a trial basis in New York recently to gauge customer interest. But, if it turns out to be popular, Verizon could expand it later on to more areas.
That could make for an interesting long-term partnership between rivals. It could also be good news for people who like Netflix but aren't quite ready to cut the cord for good.
While cord cutting has taken a bite out of the bottom line for traditional cable companies like Verizon, the truth is Netflix isn't hurting those companies all that much yet. That could change in the future as cord cutting gains even more steam, but it's not the case right now.
As mentioned, most Netflix subscribers already have a cable subscription. In fact, if Verizon can attract new customers with its Netflix bundle, it ought to have a net positive impact on VoD viewership considering the additional potential viewers.
So, Verizon's move makes a lot of sense. If most Netflix subscribers have a cable subscriptions anyway, Verizon can entice potential customers to switch away from the competition by giving them a Netflix subscription for free. After all, if you're going to pay for both services anyway, you might as well go with the company that's going to give you one of them for free.
In Verizon's case, it noticed that a lot of cable subscribers also watch Netflix, so a free year of Netflix is a pretty enticing offer for potential customers, and it costs Verizon less than $100 per new customer acquisition.
It's good news for Netflix, too, because it gives the streaming service even more exposure. Customers who take advantage of this deal will probably sign up for Netflix when their free subscription through Verizon runs out. It sounds like a win-win.