Following the lead of their European counterparts, such as Virgin Media, we have seen many headlines about online video service providers (OVDs) like Hulu and Netflix forging agreements with U.S. Pay TV operators, essentially becoming a channel/network on the cable providers’ STB. The latest partnerships include Cablevision and AT&T’s agreement with Hulu (though AT&T is not currently putting Hulu on the STB), and Mediacom’s agreement with Hulu and Netflix. While customers still need to subscribe separately to Hulu and Netflix, just as they would for HBO, Showtime or Starz, increasingly they can access the services directly from their Pay TV providers’ set top box without having to connect to some other device to stream OTT video content.

Pure OTT video services subscriptions have grown exponentially in the past several years.  While they remain a threat to Pay TV service providers, encouraging cord-cutting, we are now observing strategic partnership between them that benefit both sides. For Pay TV service providers OVDs become  a new value added service to offer to their customers and for the OTT video services this strategy represent a new revenue opportunity and friction free path to the TV, which still accounts for the majority of consumers viewing by a wide margin.

While many consumers are still paying for Pay TV packages, the growing popularity of OTT video services is undeniable. According to Strategy Analytics’s ConsumerMetrix survey, during Q4 2014, half of U.S. Pay TV subscribers watched Netflix in the past month, while 23% watched Hulu.

The take away from these new partnerships is that rather than fight OTT video services, Pay TV operators are now starting to embrace changes in consumer’s behavior and partner with these services to offer more value to their customers.