Author(s): Raghu Gopal
Last week, Netflix revealed that it's teaming up with hotel group Hilton to offer its streaming service on TVs found in Hilton hotel rooms.
The video streaming heavyweight has been an enabler of the shift in viewing habits and has persuaded many households to cut out their traditional subscription services. According to industry estimates, about 33 million people in the US ditched their cable or satellite subscription in 2018. At the end of 2018, Netflix boasted about 139 million paid subscribers, rising from 30 million a year earlier. The company has been winning over new customers with its original programming, having splashed out an estimated $13 billion in 2018 to produce its own TV shows, up from $6 billion in 2017. We expect this sum to surge further in 2019.
Now Netflix is joining forces with a giant in a completely different industry.
Hilton is a leading global hospitality company with more than 895,000 rooms and 5,500 properties under 16 different hotel brands. The hotel chain has added Netflix's streaming service to TVs in its new Connected Rooms, enabling guests to log into their Netflix accounts through the TV remote or Hilton Honors app. Hilton said its Connected Room platform ensures a guest's login information stays secure and clears automatically on checkout, unless they choose to remove it sooner on their in-room TV.
Hilton has more than 1,800 of these high-tech rooms in the US, allowing guests to control the temperature, lights, TV and other features from their mobile device or TV remote. The company plans to roll out its technology platform to tens of thousands more rooms in 2019, and to introduce it to its international properties. The Netflix offering is just one of several recent enhancements to Hilton's room technology.
Here's how it works: guests who prefer to use the Hilton Honors app can download it onto their mobile device and add Netflix to their list of favourites for easy access. Those who prefer the TV remote can press the Netflix button to power on the TV and go straight to the Netflix login screen.
This isn't the first time Netflix is being made available in hotel rooms. Thanks to Enseo, a technology platform that serves the hospitality industry, the streaming service has also been added to in-room entertainment provided by hotels like Ritz-Carlton, JW Marriott, Renaissance, Gaylord, Courtyard, Spring Hill Suites, Fairfield Inn and Suites.
Netflix subscribers outside the US make up about 60 percent of the company's subscriber total, a sign of saturation in the US market. But Netflix continues to look for local opportunities by offering its services through cable companies like Comcast, with which it signed an agreement in 2018.
Despite Netflix's strong customer wins in 2018, a slowdown in revenue growth is leaving investors uneasy. This is being amplified by the huge sums it's spending to produce its own content, as well as by growing competition in the streaming sector. Netflix is therefore rightly exploring new avenues such as the deal with Hilton to pick up momentum. In our view, Netflix should also be diversifying into different forms of content and establishing further deals with telecom operators to widen its reach. We believe 2019 could emerge as a pivotal year for the company.