NEW YORK (TheStreet) -- Netflix's (NFLX)  deal with the DISH Network (DISH) is certainly a boon to the satellite-TV operator that has long done things that other payTV operators would never do. But for Netflix, the deal is even more significant because it's all about its increasingly aggressive competition with Time Warner's (TWX) HBO.


DISH will offer Netflix streaming video through its Hopper set-top boxes, the companies announced earlier this week. That means Netflix subscribers with a DISH second-generation Hopper box will be able to stream shows like Orange is the New Black and House of Cards directly to their televisions with the same box they use to access television channels.

The deal is part of a Netflix's identity shift. CEO Reed Hastings is clearly tinkering with the streaming service's business model as he prepares to compete head-to-head with HBO, which is expected to become available as a standalone digital services sometime in the spring. 

"Netflix, when they launched their digital service, wanted to compete with satellite companies and be aggregators of content," said Shahid Khan, chairman of MediaMorph, in a phone interview. "Since then, they've realized they can't compete with cable and satellite, and they have to position themselves more like HBO."

The deal with Netflix reflects Hastings' view that it's more important to make friends with cable- and satellite-TV providers than to view them as the enemy. In other words, the payTV bundle of dozens of channels can co-exist with Netflix, the all-purpose streaming powerhouse that accounts for roughly one-third of all Internet video traffic among U.S. households during the typical evening.

Over the past decade, Khan said, Netflix has evolved from a movie and television show aggregator to a major buyer of original programming. Not incidentally, HBO followed the same route to become a premier producer of high-quality television serials.

Netflix has already clinched a similar deal to its DISH agreement with smaller cable operators such as Atlantic Broadband, Grande Communications and RCN, offer the streaming service through TiVo (TIVO) set-top boxes. For customers, these agreements mean no swapping remotes or flipping TV inputs just to jump from television to Netflix.

Bill Holmes, global head of business development at Netflix, said in the announcement of the DISH deal that many households subscribe to both Netflix and a traditional pay-TV service.

"Our vast library of TV shows and movies, combined with DISH's lineup of live television content, gives customers easy access to a wide variety of complementary programming," Holmes said in a statement.

Sounds a lot like Time Warner CEO Jeff Bewkes talking about HBO. 


TheStreet Ratings team rates NETFLIX INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate NETFLIX INC (NFLX) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and generally higher debt management risk."

You can view the full analysis from the report here: NFLX Ratings Report

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

More from Opinion

Nasdaq Exec: Exchange Is 'All-In' on Using Blockchain Technology

Nasdaq Exec: Exchange Is 'All-In' on Using Blockchain Technology

Sears CEO Eddie Lampert Looks Like He Is Sucking Company Dry

Sears CEO Eddie Lampert Looks Like He Is Sucking Company Dry

It's Dumb to Think Legalizing Weed Is Still a Political Issue

It's Dumb to Think Legalizing Weed Is Still a Political Issue

AAP Exclusive: Cramer Says The President is No Longer on the Side of the Bulls

AAP Exclusive: Cramer Says The President is No Longer on the Side of the Bulls

Why It Makes Perfect Sense for Netflix and Amazon to Buy Up Movie Theaters

Why It Makes Perfect Sense for Netflix and Amazon to Buy Up Movie Theaters