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Netflix In Talks With U.S. Cable Operators: Report

MSOs Are Increasingly Interested In Offering Netflix On Leased Boxes, But Hang Ups Persist, The Wall Street Journal Says 10/13/2013 9:12 PM Eastern

Netflix is in talks with Comcast, Suddenlink Communications and several other cable operators about integrating its streaming video service with leased set-top boxes, The Wall Street Journal reported Sunday, adding that the discussions are “in the early stages” and that no deals between Netflix and U.S. MSOs are imminent.

According to the paper, Comcast, which is set to deploy its IP-capable X1 platform in all systems by the end of the year, is in talks with online video services about adding apps to its set-top boxes.

Netflix declined to comment. Comcast was not immediately available for comment on Sunday night.

Netflix’s subscription streaming video service is offered on a massive number of broadband-connected devices sold at retail, but it’s just now starting to make some progress on MSO-leased gear. So far, all of that progress has occurred outside the U.S.

The first such breakthrough is with Virgin Media, the U.K.-based operator now owned by Liberty Global, which is testing a TiVo/Netflix combo with 40,000 subscribers ahead of an anticipated commercial launch later this year. Netflix chief financial officer David Wells, speaking at the recent Goldman Sachs Communacopia conference in New York, said Netflix will maintain the billing relationship with the customer in its deployment on the Virgin Media TiVo platform.

Com Hem, Sweden’s largest cable operator, is also making plans to offer Netflix on leased Samsung boxes outfitted with the TiVo software platform and user interface by sometime in December.

According the WSJ, at least two operators involved in the talks are balking at Netflix’s insistence that they join Open Connect, Netflix’s private content delivery network that relies on the deployment of private caches at the edge of the cable operator’s network. Several U.S. cable operators, including Cablevision Systems, RCN and Suddenlink, have joined Open Connect. Netflix recently began to offer its library of “Super HD” titles to all ISPs. Previously, Netflix only offered that content to subscribers who get broadband services from Open Connect members.

Mediacom, meanwhile, has gone in a different direction, opting to use “transparent” caches from a startup called Qwilt that are designed to help the operator manage bandwidth and boost online video quality by keeping the most popular content, including video titles from Netflix, YouTube, Hulu and other over-the-top video sources, at the edge of its network.

In comments to Multichannel News last month, Qwilt VP of marketing and business development Mark Fisher argued that private, one-off caching systems don’t scale as well as transparent platforms, adding that some ISPs are hesitant to let private caching systems in the door because it could compel them to do the same for other OTT video providers.

Netflix has argued that ISPs would do better to use Open Connect, which is offered to ISPs for free, rather than paying for caching systems from third party vendors.

Outside of the Open Connect issue, multiple industry sources have said that conditions built into the contracts Netflix has with some of its programming historically have prevented Netflix from distributing content on MSO-leased boxes, including TiVo HD-DVRs that are rented out by cable operators.

According to the WSJ, Netflix has had some success negotiating new terms that would sidestep those restrictions.

March