Twitter

Comcast will soon begin allowing subscribers to launch Netflix from within the Xfinity X1 set-top box, a stark recognition that streaming sticks and other connected-TV devices are becoming a threat to the largest U.S. cable provider.

Netflix and Comcast confirmed today that they have reached an agreement that will place Netflix on the X1 later this year. Recode, which broke the story, reported that the Netflix app would be present on the X1 interface for users to log into, but didn’t speculate on whether users would be able to sign up for Netflix through their cable service as they can now with HBO, Showtime and Starz.

Recode’s branding of the arrangement in its headline as “a very big deal” overstates matters considerably insofar as consumers are concerned. Netflix has 82 million U.S. subscribers — about half of all U.S. households — so it’s a pretty safe assumption that millions of people are already subscribing to both Comcast and Netflix. The deal does likely put to rest several years of squabbling between the two companies over streaming speed and data caps.

Inexpensive streaming devices like the Roku’s Streaming Stick ($50) and Amazon Fire TV ($39) are a significant threat to Comcast’s cable business. Those so-called OTT (“over the top”) devices make it easy to view the big three streaming services (Netflix, Amazon Video, Hulu), cable-killer services (Sling TV, PlayStation Vue) freestanding premium-cable services (HBO NOW, Showtime and Starz), and smaller, niche services (Seeso, Tribeca Shortlist) — and all without the need for subscribing to a satellite or cable package.

Research firm Parks Associates estimates that 64 percent of U.S. broadband households subscribe to streaming video service but that only 36 percent of U.S. broadband households are using streaming players. That spread is partly attributable to people using gaming consoles, Blu-ray players or other devices, but it also includes people who use streaming services on their portable devices but haven’t streamed content to their living room TVs yet. There’s tremendous room for growth as devices continue to get faster, smaller and cheaper. Also, nearly all of the major TV manufacturers are now selling internet-ready TVs that work streaming services even without the need for a TV-connected device.

By putting Netflix on its cable interface, Comcast improves its subscribers’ overall user experience and gives them one less reason to buy a Roku 4 or a Google Chromecast. For cord-cutters, buying that streaming device is often the first step in a cycle of watching more content on the device, watching less content on cable, deciding that cable is no longer a good value, and then dropping cable. Comcast wants to make sure that its service is part of that overall ecosystem.

The deal is also a win for Netflix, which has grown its base of U.S. subscribers more slowly over the past year than before, and there are a lot of Comcast customers who don’t subscribe to Netflix but might if the interface on their X1 box made it easy to do so. “Set-top integration could be a positive catalyst for further U.S. subscriber growth across older demographics, a key area where Netflix remains under-penetrated,” Morgan Stanley analysts Benjamin Swinburne and Brian Nowak wrote in a recent research note.

Satellite, cable and other pay-TV providers have stabilized their subscriber numbers this year after after losing about 12 million subscribers from 2001 to 2015, but the unquestionable trend has been toward subscribing to broadband without satellite or cable service. Leichtman Research’s data shows broadband providers adding 1.1 million subscribers in the first quarter of this year but pay TV adding only 10,000 subscribers. Comcast added 438,000 broadband subscribers for the quarter but only 53,000 cable subscribers.

Comcast is smartly re-casting Netflix as a supplementary service rather than as a competitor, and I wouldn’t be a bit surprised if Comcast’s new deal with Netflix will allow Comcast customers to add Netflix to their cable bill as they can now with premium-cable services. That won’t reverse what ails pay-TV providers, but it will help.