With the ink barely dry on Comcast's deal to buy Time Warner Cable, Netflix is already feeling the effects of one of the industry's biggest proposed mergers on record.
Bloomberg is reporting that talks between Netflix Inc. (Nasdaq: NFLX) and Time Warner Cable Inc. (NYSE: TWC) to put the video streaming service on cable set-top boxes have been put on hold until TWC's acquisition by Comcast Corp. (Nasdaq: CMCSA, CMCSK) (which still must be approved by regulators) is completed. That, in turn, could throw a big monkey wrench into Netflix's plans to start taking the US cable industry by storm this year.
Netflix has gained some traction with cable operators in Europe and currently has its streaming service on set-tops from Virgin Media Inc. (Nasdaq: VMED) and com hem AB . However, the video rental giant has not been able to close any deals with cable providers in the US. Time Warner Cable was apparently considering an agreement with Netflix, but those negotiations have been put on the back burner now thanks to the Comcast merger deal. (See Com Hem Rolls Out Netflix.)
There are fears in the video industry, especially among content providers, that a combined Comcast/TWC entity would control too much of the television distribution network in the US. It's not just size that's at issue. Comcast is also much more cautious than Time Warner Cable about partnering with alternative platform providers, and much more ambitious about rolling out its own services that are competitive with over-the-top (OTT) offerings.
For example, while Comcast has its own app on the Xbox 360, it hasn't followed TWC's lead in pushing an app out to numerous other video platforms. Comcast has also blocked HBO Go for its subscribers on the Roku box, preventing users from accessing more content from Home Box Office Inc. (HBO) on a Roku Inc. device than they can on a Comcast set-top.
On the services side, Comcast has been aggressive about building up its video-on-demand (VoD) library. Plus, the company's Streampix offering is a first step into the subscription-based VOD rental market, where it competes against the likes of Netflix. (See Comcast Goes OTT to Target Netflix, Hulu Plus.)
Time Warner Cable, on the other hand, has followed a strategy of offering its core video service on as many different video platforms as possible. The company added Kindle Fire tablets from Amazon.com Inc. (Nasdaq: AMZN) to its distribution list in December alongside iOS and Android devices, Roku players, Microsoft Corp. (Nasdaq: MSFT)'s Xbox 360, and select Samsung Electronics Co. Ltd. (Korea: SEC) connected TVs. There are also rumors that TWC was planning to debut service on the new Apple TV set-top device, which Apple Inc. (Nasdaq: AAPL) is targeting for launch in April. (See TW Cable Says: Just Keep Streaming.)
There is no way to know how Comcast might proceed in talks with Netflix if and when the acquisition of TWC is completed. However, Comcast's track record suggests that Netflix may need to reconsider its near-term plans for a cable partnership. The perspective from the cable industry has changed.
— Mari Silbey, special to Light Reading