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Comcast's Time Warner Cable Acquisition Thwarts Netflix

17 Feb, 2014 By: Erik Gruenwedel

Streaming pioneer reportedly was readying inclusion in TWC set-top boxes

Comcast’s $45 billion acquisition of Time Warner Cable reportedly stymied efforts by the No. 2 cabler to include Netflix on TWC set-top boxes. Comcast operates its own subscription streaming service through its broadband Xfinity platform.

“They will not be in any kind of rush to let Netflix on their cable box and cannibalize their business,” said Sterne Agee & Leach analyst Arvind Bhatia.

TWC, which has been buffeted by significant video subscriber losses following a protracted retransmission dispute with CBS last summer, among other issues, had sought to include Netflix as a secondary option to its subscribers, according to Bloomberg, which cited sources familiar with the situation.

Netflix CEO Reed Hastings has made no secret that he encourages a symbiotic relationship with multichannel video program distributors. Netflix believes it can attain 60 to 90 million household penetration in the United States — a milestone that might require assistance from multichannel video program distributors.

Comcast, which has about 50% of Netflix’s subscriber base, last November launched digital sellthrough on its Xfinity platform. The store recently added Warner Bros. movies, with plans to include additional content holders, according to Nancy Spears, VP, digital media distribution & monetization.

"Seventy percent of our subscribers actively use our on-demand every month, so that's speaking to the great success our [digital sellthrough] platform has been so far, and I think it will only continue to grow," Spears said.

Last September, CFO David Wells told an investor group in New York that Netflix could help — not hinder — subscriber retention among multichannel video program distributors.

“It’s up to the MVPDs to decide how much of a competitor they view us, or complement, and how much they might be willing to do something with us,” Wells said.

The CFO said there remain reservations among MVPDs regarding the roles of linear and over-the-top video distribution.

“They’re trying to understand the monetization of one channel versus another. And it becomes blurry when those things overlap each other, and [MVPDs] have less line of sight in terms of how much value is being delivered through the channels,” he said.

Netflix currently is available as a separate service to Virgin Media subscribers in the United Kingdom, and well as a cable operator in Scandinavia.

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