Mediaboss Marketing

Netflix (Nasdaq: NFLX) seems bent on showing up on your cable bill, and now it's starting to become painfully obvious why the dot-com flick-streamer is talking to cable providers about offering Netflix as a premium add-on service.

In a note to clients yesterday, Barclays Capital analyst Anthony DiClemente praises the move by pointing out how it should increase Netflix's subscriber base, lower its subscriber acquisition costs, and deliver long-term profit growth.

Obviously, it remains to be seen what the ultimate product will look like, but Netflix won't be able to charge more than the $7.99 a month it charges existing streaming subscribers. With cable companies historically taking roughly half of the revenue, how can Netflix, making $4 or so a month off each cable customer, be better off than it would be by reaching out directly?

Well, let's drag out the churn card.

As the world churns Netflix is no longer reporting its monthly defection rate, and there's a good reason for that. Streaming customers are a fickle lot. Netflix's churn for members taking out DVDs was never all that impressive, but at least they have unwatched Netflix DVDs around the house. They also have steady and predictable queues -- unlike with the streaming product, where a good chunk of a member's queues can be wiped clean by the end of a licensing deal.

In the last quarter that Netflix reported domestic churn -- last year's second quarter -- churn clocked in at a stubborn 4.2%. That's a monthly rate, implying that Netflix loses roughly half of its subscribers over the course of a year.

Now let's compare Netflix to DIRECTV (NYSE: DTV) . The country's largest satellite television provider reported its latest quarterly financials on Monday. The service provider with 19.4 million stateside subscribers -- and growing -- doesn't have any reason to hide its churn. Just 1.5% of its accounts are canceling every month. Maybe it's the gear. Maybe it's complacency. However, it would also follow that premium movie channels that cable and satellite television customers tack on would also have healthy loyalty rates.

If Netflix is just a small line item on your cable bill, you're less likely to nix the service than you would be if it was a stand-alone offering. And -- to Netflix's credit -- it's just too darn easy to terminate the service.

Apple leads the way One of the interesting developments surrounding yesterday's Apple TV announcement -- yes, it wasn't all iPad for Apple (Nasdaq: AAPL) yesterday -- was a partnership with Netflix. Apple TV owners can now sign up for Netflix directly through Apple's small set-top home theater gadget.

The new Apple TV will allow couch potatoes to stream Netflix in high-def 1080p, backed by rich Dolby Digital 5.1 audio. However, the interesting twist is that the subscriptions are managed through Apple iTunes.

Read more:
The Real Reason Behind Netflix's Cable Push