Netflix Cozies Up to Cable - Multichannel

Netflix Cozies Up to Cable

HASTINGS: WE’LL PUT AN ‘APP’ ON LEASED BOXES
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Netflix CEO Reed Hastings said last week what every cable investor was hoping for — the streaming-video giant was in talks with several cable operators about a possible relationship, most likely the inclusion of a Netflix “app” on leased set-top boxes.

Speculation had been rampant for days that Netflix was engineering some type of cable deal — several reports mentioned everything from the service as an HBOlike premium channel to a symbiotic relationship with broadband offerings from cable companies.

In the end, Hastings didn’t offer too many details, but said that Netflix was in talks with several cable operators, including Comcast.

In a YouTube video chat after its third-quarter financial results were released, Netflix chairman and CEO Reed Hastings acknowledged talking with Comcast about possibly including a Netflix app on the MSO’s leased set-top boxes. But he added that there were still issues to be worked out.

“I’m sure we can be on a Comcast set-top,” Hastings said. “We have to figure out the deal terms that make sense for both sides. It’s been an ongoing discussion with many of the MVPDs, not just Comcast.”

Previous reports have said a stumbling block to wider acceptance by U.S. cable operators is Netflix’s insistence its partners use its “Open Connect” service, a private content-delivery network. Some operators fear ceding control of a portion of their network and are concerned it would open the door to offering similar privileges to other over-the-top video providers.

Hastings said concerns over connecting to Netflix’s content- delivery network affects its ability to do wholesale deals “a little bit,” but added that the company’s top priority is to ensure its customers have the best video experience possible.

“ISPs that directly interconnect with Open Connect have a better experience,” he said.

Hastings said he has a Comcast X1 set-top in his home where he is able to access other apps, such as streaming-music service Pandora.

“I think, I would like to be able to watch Netflix [too], and that would keep me on the Comcast X1, which is a great product,” Hastings said. “I’m really hopeful that we can do that with Comcast and other people in the industry.”

Hastings wouldn’t name the other prospective MSOs, but at least one let the cat out of the bag last week. In an interview with SNL Kagan, Cable One chief operating officer Julie Laulis said the midsized MSO has had talks with Netflix.

According to Laulis, a Cable One executive was one of 10 MSO representatives invited to participate in a conference call with Netflix to discuss carriage issues. Netflix is particularly attractive to Cable One because the operator doesn’t currently offer video on demand, Laulis said.

“You only consider them the enemy if you consider video the Holy Grail,” Laulis told SNL Kagan.

That seemed to echo Hastings’s sentiments that he did not view Netflix as a replacement for cable, but as a complement.

But as cable operators struggle with video subscriber losses, Netflix continues to grow, adding 1.3 million domestic customers in the third quarter and ending the period with 31 million U.S. members. Worldwide, Netflix is going even better — it added 1.4 million global customers in the period, pushing its international subscriber base to 40 million.

TAKEAWAY

Netflix CEO Reed Hastings confirmed that the streaming-video giant is talking to cablers about including the service on leased set-tops.

Amazon Primed to Offer More Video

Online retailing giant Amazon continues to grow subscribers to its Amazon Prime service, which includes access to streaming video.

In releasing its third-quarter results last Thursday (Oct. 24), Amazon said it added “millions” of Prime customers in the quarter, but when pressed for further details on a conference call with analysts, chief financial officer Tom Szkutak replied only that the service was “growing very fast.”

Analysts estimate that Prime had about 10 million customers earlier in the year, so while it is growing rapidly — analysts estimated it had about 5 million customers 18 months ago — it still has a long runway before it reaches Netflix’s subscriber levels.

But the online retailer continues to pump money into the Prime Instant Video service — it has slated five original series already, and said it continues to invest in original content. It also raised its free shipping minimum to $35, which should add to Prime’s customer rolls; one of the benefits of a $79 annual Prime membership is free shipping on all other Amazon purchases.

Amazon launched Prime Instant Video in 2011 and offers access to about 41,000 movie and television episodes. The online giant announced in May its intention to launch five original scripted series later this year.

— Mike Farrell

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