Video services

Netflix's Path Into MSOs Becomes Clearer

The end of Netflix Inc. (Nasdaq: NFLX)'s deal with Starz Entertainment LLC on Thursday may get Netflix a step closer to offering its app on TiVo Inc. (Nasdaq: TIVO) boxes that are distributed by cable operators. (See Netflix, Starz on the Outs .)

The Starz deal was why RCN Corp. was unable to offer Netflix on TiVo boxes when the cable operator launched its TiVo offering in May 2010, RCN Senior Director of Video Product and Video Network Operations Jason Nealis tells Light Reading Cable. He says he's eager to reopen the dialogue with Netflix now that that Starz deal has expired.

Netflix, meanwhile, is showing some interest in partnering with cable as the company continues to develop original programming and look more and more like a premium programmer such as HBO. (See Netflix Plays Friendly With Cable.)

RCN, like other MSOs, offers TiVos outfitted with CableCARDs that deliver the operator's linear TV lineup and are integrated with its video-on-demand (VoD) service. (See RCN to Expand TiVo 'Premiere' Rollout and RCN Rolls TiVo's Whole-Home DVR .)

But Netflix has not been part of that because its contracts with some programmers prevent it from streaming content to TiVo devices leased to customers by RCN, Suddenlink Communications and other MSOs. Starz's cable VoD service and the one it was offering through Netflix, which also included access to a stream of Starz's flagship linear channel, apparently were not permitted to run concurrently on an MSO-supplied device. (See Suddenlink Blames Netflix Contracts .)

Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s integration with TiVo, which will soon get underway in San Francisco, won't be affected by such restrictions, because it's limited to TiVos sold at retail. (See Comcast Trial Fuses TiVo With VoD.)

Whether the Starz deal was the only one in Netflix's way is unknown. Netflix isn't commenting about its negotiations with content owners, or about whether it might be interested in creating an MSO-friendly app that only streams content that wouldn't violate Netflix's current distribution contracts.

Although some view Netflix as competitive to cable VoD, MSOs that lease out TiVos also have some good reasons to want Netflix in the package. For starters, it puts them on a par with the features and apps that grace TiVos sold at retail. MSOs also want to keep customers engaged on the primary set-top when they use Netflix rather than seeing them toggle to another input such as a Blu-ray player, a Roku Inc. or Boxee box, a game console or via a connected TV.

— Jeff Baumgartner, Site Editor, Light Reading Cable

Jeff Baumgartner 12/5/2012 | 5:40:51 PM
re: Netflix's Path Into MSOs Becomes Clearer

...if the death of the Starz deal removes the only contractual  hinderance for Netflix to get on leased MSO boxes, makes me wonder if Netflix could find some success down the road getting on other leased set-tops with IP capabilities.  Netflix has its app on almost every other device under the sun, so I'd guess they'd also have interest in getting on the device that's eluded it so far-- the cable STB. 

Comcast is creating an app environment for the X1, but I'd be surprised if they'd want Netflix on there if it's true that the new Streampix service is being groomed as a true Netflix competitor.  But there are plenty of other MSOs out there, particularly the smaller , independent ones, that might find the prospect of having Netflix available on their boxes since many of  their customers will be using Netflix with or without their help. JB

Jeff Baumgartner 12/5/2012 | 5:40:50 PM
re: Netflix's Path Into MSOs Becomes Clearer

But I should also mention that if TiVo is successful in getting Netflix in MSO-leased boxes, it won't be the first time. Arris does allow Netflix to run on its Moxi gateways that it sells to MSOs, but it has to perform a few tricks to make it happen, as explained in this LRTV interview from last year. JB

msilbey 12/5/2012 | 5:40:49 PM
re: Netflix's Path Into MSOs Becomes Clearer

Good point about Comcast licensing out Streampix- didn't think of that angle. But even if that happens, I'm guessing the service providers will want more than one option. Particularly if Netflix looks like an independent player compared to Comcast, which will likely one day start to edge outside its footprint.

RE: Netflix subscription- I know we got a bunch of kids content via Starz that won't be available anymore. But our Netflix usage seems to ebb and flow anyway. Price is low enough that I don't mind, but there may still come a time when the ebbing is such (thanks to VOD and DVR) that even $8/month isn't worth it. 

Jeff Baumgartner 12/5/2012 | 5:40:49 PM
re: Netflix's Path Into MSOs Becomes Clearer

Yeah, they could match up the Netflix's streaming library with transactional VoD  content from a source like Amazon.  At the same time, we'll have to keep an eye on Streampix and see if Comcast tries to sell access to that library through MSO partners. 

But agree it'll be interesting to see how Netflix subs react in Q2 as they become more aware that there's a Starz content gap. I'll keep my Netflix subscription (streaming only) for now, but I get Starz VoD from my cable provider, so I guess I'm still covered in that respect. JB



msilbey 12/5/2012 | 5:40:49 PM
re: Netflix's Path Into MSOs Becomes Clearer

This makes perfect sense. Not everyone can afford (or wants) to create a back catalog VOD library the way Comcast is doing. Why not use Netflix as outsourced VOD? 

Separately, I'm also still curious about how much of a backlash there will be with the disappearance of Starz content. I'm sure most Netflix users weren't aware this was about to happen.

Jeff Baumgartner 12/5/2012 | 5:40:44 PM
re: Netflix's Path Into MSOs Becomes Clearer

Even with Starz out of the streaming picture, I wonder if Netflix's deal with EPIX, signed in Aug. 2010, has similar provisions that would prevent Netflix from being on a leased cable box.   Netflix's deal with Epix already prevents Netflix from offering those titles until 90 days after they debut on its linear channel, so perhaps  that helps. Just not sure.

By the same token, do you think it makes sense for Netflix to create an MSO-friendly version?  Or are there so many other CE outlets for Netflix that it's hardly worth the trouble? JB


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