Netflix, Cable Operators Thinking Inside the Box

OTT PLAYER WANTS IN ON MSO SET-TOPS
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Netflix and several U.S. cable operators, including Comcast and Suddenlink Communications, are negotiating deals that would pave the way for the streaming service to be integrated with leased cable boxes, according to several sources with knowledge of the talks.

While there are indications that Netflix’s deals with content programmers now provide the business means to offer its app on leased devices, other technology-focused elements of those discussions could derail such deals, or at least keep them in a holding pattern, the sources said.

In Comcast’s case, talks have centered on porting the Netflix app to Internet protocol-capable HD-DVRs and gateways that run on the operator’s X1 platform. Suddenlink, RCN and others are similarly looking for ways to get Netflix on leased TiVo boxes. Comcast and TiVo declined to comment. RCN has been looking to get Netflix baked into its TiVo offering since the get-go.

People familiar with the discussions say Netflix and U.S. operators have been talking about this, off and on, for more than two years. While the latest round of negotiations were characterized as being in the “very early stages,” they have apparently heated up again as Netflix carves out revised content deals that will allow it to stream video on cable-supplied boxes.

Netflix has already had some limited success gaining entry on leased devices in the U.S. and across the pond. Virgin Media, the U.K.-based operator now owned by Liberty Global, is testing a TiVo/Netflix combo ahead of a commercial launch later this year. Com Hem, Sweden’s largest cable operator, plans to do the same by December.

In the U.S., Google Fiber has integrated a Netflix player with the TV Box it is deploying in Kansas City.

A major point of contention in the negotiations is Netflix’s insistence that operators join Open Connect, a private content delivery network that relies on Netflix-supplied edge caches, according to a source with a top-three U.S. MSO. Although operators such as Cablevision Systems, Suddenlink and Google Fiber are card-carrying Open Connect members, many others have avoided it over concerns that allowing Netflix in the door will cede some control of their networks and compel operators to extend similar privileges to Amazon, You- Tube and other over-the-top video providers.

Netflix holds that Open Connect is free and delivers the best Netflix streaming experience. Some MSOs are worried that Netflix could later try to turn the tables and charge them for these local caches.

There are also other options. Mediacom Communications, for example, is using a “transparent” caching system from a startup called Qwilt to help it keep OTT video traffic in check.

Adding Netflix to leased boxes will keep cable customers engaged on the operator’s video platform and from toggling to a different device. But the business benefit of adding Netflix is questionable for some cable operators. Comcast, for example, has already launched Streampix, a cross-platform, premium VOD service that is considered a Netflix competitor.

TAKEAWAY

Several U.S. cable operators are in talks to bring Netflix’s popular over-the-top streaming-video service to leased set-top boxes, with technical issues now the main concern.

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