[opendtv] Expect Time Warner/Comcast Cable to Offer Netflix - TheStreet

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
  • Date: Tue, 18 Feb 2014 10:13:36 -0500


I find some of Rocco's work very interesting, but I think he is way too 
optimistic on this one...

Expect Time Warner/Comcast Cable to Offer Netflix

NEW YORK (TheStreet) -- A few months back, I ranted about a scoop I had ...

Despite the media gushing over "talks" that would lead to Netflix (NFLX) 
becoming an a la carte cable option, I told you it wasn't going to happen. And, 
in October, that was good information.

However, things have changed.

If regulators approve the Time Warner Cable (TWC)/Comcast (CMCSA) deal -- and I 
don't consider this a slam dunk -- expect cable, big and small, to offer 

In fact, I will go so far as to guarantee that if Netflix wants this to happen, 
it will happen. For that matter, just about anybody else -- be it Hulu or 
Amazon.com (AMZN) Instant Video -- will be able to receive the same treatment.

Here's why ... because why not?

The TWC/Comcast behemoth should, in theory, be good for consumers from a cost 
standpoint. That's because the combined company has unprecedented pricing power 
over the networks. The timing of existing contracts aside, this sets up a 
scenario where TWC/Comcast can and will turn the screws on everybody.

Theoretically, this portends lower prices for consumers. Because TWC/Comcast 
will control relationships with, say, Time Warner's (TWX) HBO and Disney's 
(DIS) family of networks like never before. Even ESPN.

Gone are the days of Disney extorting cable with ... You want ESPN, you also 
have to carry ESPNU and ESPN Yugoslavia III. They'll have to give in on the 
number of throwaway networks TWC/Comcast carries and on the price they pay to 
broadcast the ones viewers actually want.

In a perfect world, this brings your cable bill down. If TWC/Comcast can use 
its size and scale to force HBO to take 50 cents or $1.00 less per subscriber 
(or whatever, these are random, top of my head numbers), the consumer should 
see that cost savings. But don't hold your breath. Entities such as cable 
rarely lower prices.

However ... if the TWC/Comcast deal happens, I expect the company to position 
itself as the one-stop shop for all forms of entertainment.

It will jettison the old cable packages and move closer, if not directly to the 
a la carte model. This gives very few programmers privilege or a guaranteed 
retransmission fee. You only see that cash if the cable customer picks you out 
of the crowd.

That's where Netflix enters the picture in what will be true, though probably 
not as well publicized as its past accomplishments disruption.

TWC/Comcast will position itself as the Best Buy (BBY) of cable. Anything you 
want in the universe, we have it. Standalone. A la carte.

You want Netflix for $8.00 a month. No problem. Click this button, get all of 
the information you need, including a tutorial for dummies on how to use 
Netflix, buy it and we'll add the charge to your monthly bill.

Reed Hastings will be more than willing to give TWC/Comcast a sweet deal on 
commission per signup. By doing so, Netflix collects additional subscribers 
(like the older generation who requires an introduction to streaming via 
something more familiar such as cable) and, maybe more importantly, contributes 
to the sudden position of weakness HBO, ESPN and every other network, large and 
small, operates from.

Because TWC/Comcast will be able to position its platform as one that, like 
Best Buy, contains stores within stores. We have everything you want. We're 
your one stop shop for everything. Every streaming video service that wants to 
sign up. In. Internet radio services. You're in as well.

There's no need -- or at least there should not be a need -- for, say, Roku. Or 
Apple (AAPL) TV. 

All TWC/CMCSA needs to do is get every one of its customers' television sets 
hooked up to the Internet in some way and they can immediately own that turf. 

Box out Roku. Box out Apple. Box everybody out. 

Because there's no reason cable can't offer what these companies offer. For 
example, all Apple TV would have going for it is a lock on existing iTunes 
content libraries. 

The role of the delivery middleman comes to an end (or becomes less 
viable/lucrative) if TWC/Comcast plays its cards right. 

If this isn't their plan -- or they don't have something in mind that at least 
resembles this -- they're nuts. I can't imagine TWC/Comcast would decide to get 
together to watch their control over the market fade away due to inaction. 
Because their market share will erode if they stand pat. Consumers are 
skeptical of this deal to begin with. If they feel like they're getting screwed 
as a result or not receiving the benefits of a brave new digital world, they'll 
go elsewhere. 

TWC/Comcast is in the position to sweeten the value proposition for the cable 
customer now. I would be stunned if they drop the ball here.

They'll open their platform up to anybody that wants to be part of it. And, in 
the process, they'll pay less to partner with the entities that provide that 

If anybody should be referring to big name networks as their "bitch" right now, 
it's TWC/Comcast.

Approval of this deal absolutely ends the way business gets done between cable 
companies and the networks. While cable subscribers might not see their prices 
come down, they will receive -- or at least be told they're receiving -- the 
ability to customize their packages and extract what looks like meaningful 
value from a sea of an increased number of choices.

--Written by Rocco Pendola in Santa Monica, Calif.

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