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Do US cable operators have the vision to partner with Netflix?

Written by Rich Fiscus @ 14 Oct 2013 8:12 User comments (6)

Do US cable operators have the vision to partner with Netflix?

Cable television operators in the US find themselves in an increasingly difficult position with respect to Netflix streaming video. On one hand it is the chief competition for their legacy pay TV business. On the other hand it arguably the biggest driver of increasingly higher speed Internet subscriptions, accounting for around a third of US Internet traffic.
Netflix has already established partnerships with Virgin Media in the UK and Com Hem in Sweden. Among the terms of these deals each company provides a Netflix TiVo app for their customers. At a Goldman Sachs conference last month Netflix CFO David Wells also expressed interest in forming similar partnerships with US pay TV providers.

Now the Wall Street Journal is reporting negotiations with multiple cable companies (paywalled content) including Comcast and Suddenlink Communications to establish those partnerships. According to their sources there are still significant issues to be resolved in negotiations between the parties. Perhaps the most important, at least for consumers, is the Netflix demand to integrate technology to improve streaming quality into broadband provider networks. Presumably this would involve some kind of caching on ISP networks which would allow both higher bitrate streams and lower bandwidth utilization by Netflix servers.



Even assuming Netflix manages to find enough common ground with cable providers to get these deals done it would still be little more than a baby step towards meeting consumer demand. Certainly it would be an improvement for customers who supplement pay TV with online streaming. However set-top boxes for video subscribers won't really do anything for those who use Netflix as a pay TV substitute instead.

If anything they will be intended as a holding action to delay the inevitable drop in cable television subscribers. So far stagnant subscriber numbers over the last three years have been more than offset by price increases. Until the shift to online video hits their bottom lines you should expect everyone in the industry to focus on tomorrow's profits rather than next year's market.

In fact it wouldn't be surprising if these talks go nowhere at all. Cable operators are already being pressured by media companies to come up with their own streaming packages to compete with Netflix. In the case of Comcast that is complicated by their ownership of several cable channels through their NBCUniversal subsidiary.

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6 user comments

114.10.2013 09:30

Most cable companies have been in a monopoly position so long that they refuse to even consider changing anything other than the fee (and then only increases). Heck, my cable company has a grand total of 12 HD channels, which I think were only made digital so they could get people to rent their HD downscaler boxes for $12 a month...even the local channels that are broadcast in HD are not HD on cable. Could an organization like that actually be expected to partner with Netflix to optimize quality, let alone build their own netflix?

The only way I see any remotely cable-related company partnering with netflix is with the channel companies themselves...if HBO offered a package where you could get all their latest content on netflix, and charged the same monthly fee that is added to a cable bill for HBO then it would probably be very successful (especially after someone watched the first season of an HBO show, only to find that it ends in a cliffhanger and they needed this package to watch the next three seasons). Netflix as an a-la-carte cable service is very appealing and very possible...and the massive revenue losses from the cable companies would be well deserved as they have been able to offer a-la-carte and higher quality for years and have refused to do so.

214.10.2013 13:11

I never have & never will use Netflix or any streaming service even if they do partner with DirecTV who is my provider. I'm just not into it.

314.10.2013 22:49

A lot of people get their internet service from the local cable tv operator. I bet they'll just throttle Netflix traffic to the point it's unusable. They'll try to kill Netflix instead of competing.

415.10.2013 13:57

Originally posted by Blackloz:
I never have & never will use Netflix or any streaming service even if they do partner with DirecTV who is my provider. I'm just not into it.
Why???

And what do you do if you miss an episode and it's NOT available on ON-DEMAND?? Go stream it or just say "F it"??

515.10.2013 17:28

Originally posted by hearme0:
Originally posted by Blackloz:
I never have & never will use Netflix or any streaming service even if they do partner with DirecTV who is my provider. I'm just not into it.
Why???

And what do you do if you miss an episode and it's NOT available on ON-DEMAND?? Go stream it or just say "F it"??
I only care for Netflix by mail [No the streaming service].
But still Blockbuster by mail is a lot better. (I have both.)
I maybe behind on watching movies and TV shows, but I am busy doing other things that be in front of any screen.

616.10.2013 02:54

Even though I'm a die hard Netflix streaming viewer (and have been since I had to use a browser window on my HTPC) I completely understand why some people would avoid it. For all the convenience there's a serious quality problem which I think can only be solved by the sort of caching solution they're pushing with their partnerships. In fact I suspect that's one of their primary motivations.

The other is probably what CNDLG alluded to. Particularly in the cable Internet industry there's a serious concern about ISPs throttling streaming services because they don't want competition for their own video offerings. For Netflix a partnership represents a hedge against that throttling.

To answer my own question from the headline, I don't think any of the larger ISPs are going to become Netflix partners any time soon but I suspect some of the smaller ones are likely to get on board sooner rather than later simply because they don't have the financial means to compete with satellite providers on sports. That's increasingly where the money is in pay TV but if you don't have the deep pockets of a Comcast or Time Warner Cable you really don't have a chance.

If you're one of the small, regional operations like Mediacom here in Iowa you're also worried about new competition for wired TV service you've never had to deal with before. We're too small a market for Verizon or AT&T to have gotten here with fiber service before they started scaling back their expansion plans. OTOH Centurylink has their eye on IPTV as a way to subsidize/justify upgrading the residential neighborhoods with new fiber to roll out significantly higher speeds.

Being able to tell customers and potential customers they're partnered with Netflix and also that the quality will be better than the competition could be significant for their bottom line. I can't imagine it happening next month or even in the next few months but I could see it happening within the next year. Regardless of when it happens, or even if Mediacom decides to be one of the early partners, the current market and likely near future suggests to me this will happen from the bottom up rather than the top down.

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