Video services

Netflix Plays Friendly With Cable

Word that Netflix Inc. (Nasdaq: NFLX) sees itself as a friend to cable in the long term kicks off today's cable news roundup.

  • Netflix is aiming to be a complement, rather than a competitor, to the cable industry. CEO Reed Hastings told a Morgan Stanley investor conference this week that, as MSOs expand their Internet VoD capabilities, he sees Netflix becoming a component of cable's offerings, as well as an ally that can keep other premium programmers in check. It's an idea that's crossed cable's mind, too. Last fall, Tom Rutledge, while COO at Cablevision Systems Corp. (NYSE: CVC), said he'd "love to sell Netflix as a service on my cable system." (See Cablevision Would Love to Sell Some Netflix .)

  • Netflix's partnership with Starz Entertainment LLC ended Wednesday, meaning it's lost access to an important library of movies in the premium release window and a live stream of the flagship Starz linear channel. Netflix didn't want to put Starz in a higher-priced tier, which would have cost it upward of $300 million. The company has since started to bridge the gap by making other content deals and investments in original programming. (See Netflix, Starz on the Outs and Did Starz Reject $300M Netflix Offer?)

  • Time Warner Cable Inc. (NYSE: TWC) has closed its $3 billion acquisition of Insight Communications Co. Inc. from The Carlyle Group LLC Wednesday, a deal that gives the MSO systems serving more than 760,000 customers in Evansville, Ind.; Louisville, Covington, Lexington and Bowling Green, Ky.; and Columbus, Ohio. (See Time Warner Cable Splashes Out $3B for Insight .)

  • Insight CEO Michael Willner writes on his blog that a "handful of senior managers, including me, will depart immediately." Willner notes that he'll keep the site going as his personal blog and that he "will continue to be involved in the cable/broadband world. I'm just not sure where or when."

  • Canadian MSO Cogeco Communications (Toronto: CCA)'s European adventure is over after it sold Cabovisão S.A. , its Portuguese subsidiary, to the European Altice Group for €45 million (US$59.83 million).

    — Jeff Baumgartner, Site Editor, Light Reading Cable

  • Jeff Baumgartner 12/5/2012 | 5:40:56 PM
    re: Netflix Plays Friendly With Cable

    RCN's Jason Nealis tweeted that he's "been very unsuccessful on getting Netflix to return a email or a phone call. (getting netflix on RCN TIVO)" 

    Granted, Netflix has already said its contracts with studios prevent it from streaming content to MSO-leased devices, but we're checking in with them to see if they are making any progress in getting rights to do that so  RCN and other cable ops can add that piece to the TiVo boxes they are leasing to customers.   More soon.JB 



    ethertype 12/5/2012 | 5:40:52 PM
    re: Netflix Plays Friendly With Cable

    What does cable get by reselling Netflix?  In the short run Netflix has some content rights and software clients already built into a gazillion consumer electronics devices.  But, oh wait, in the short run, Netflix can't stream its content to MSO-leased devices and MSOs can't stream their content to Netflix client.  So, really all they can do is bundle-price two services that have nothing to do with each other.  Worse, Netflix content is at least partially redundant with MSO's own on-demand content.

    In the long run, MSOs and Netflix are both content aggregators looking to own subscribers and provide their aggregated content across a wide range of devices.  In other words, competitors.

    Yes, you may argue that Netflix will be transformed into an original content powerhouse (after all, they have commissioned a couple of shows, and starting blabbering on about how HBO is their closest competitor).  But I am not convinced.  And in any case, MSO's should clearly wait and see whether Netflix makes that transformation before basing a deal on it.


    Am I missing something?

    Jeff Baumgartner 12/5/2012 | 5:40:52 PM
    re: Netflix Plays Friendly With Cable

    I'm not sure what the biz model would look like since Netflix has done pretty well without any help from cable partnerships.  We'll have more on this soon, but some cable guys don't see Netflix as a direct competitor since they offer content that their customers want... A/nd since Netflix is on just about every other device on the planet, some would prefer to see it integrated on their leased boxes, like a TiVo for instance, to keep their customers engaged with their box/service rather than going to another input to watch Netflix on a Roku or the Xbox 360.  So the interest  may not be a direct revenue play at the early stage, but something more tied to customer engagement.  But agree that a couple of original shows don't make them an HBO either. JB

    craigleddy 12/5/2012 | 5:40:49 PM
    re: Netflix Plays Friendly With Cable

    Yea, I don't get what's in it for cable -- or Netflix. Netflix has the advantage of going directly to consumers and bypassing the business middle-man (cable operators), something that some other programmers would love to do. So now they want cable operators to pay them for this privilege? Is Netflix saying it wants to launch a premium cable TV service??

    I suppose it could make sense for a cable operator to partner with Netflix if they were small, lacked VOD (there are still a number of small ops without VOD, believe it or not) and were looking for a well-branded player to support a co-branded TV Everywhere-type offering. But that's a tall order.

    Maybe some marketing maven out there can tell us how an MSO-Netflix alliance can make sense. Otherwise this seems like public posturing for other reasons. 


    Jeff Baumgartner 12/5/2012 | 5:40:49 PM
    re: Netflix Plays Friendly With Cable

    Netflix wants to get on every device possible, but not sure they'd be willing to alter the biz model if they have to share revs with MSOs to get on those boxes. I think long term Netflix sees itself as a premium service as it builds more original programming and maybe manages to steal some premium window deals from HBO, Starz and Showtime.  But those are alot of ifs. Doesn't seem like there's much that's imminent here. JB


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