Seeking Alpha
Research analyst, streaming and online video
Profile| Send Message|
( followers)

Earlier in the week, Reuters was reporting that Netflix's CEO was in talks with cable operators about bundling Netflix's (NASDAQ:NFLX) streaming service in with cable TV packages. Of course when then media got wind of the story, most of them naturally assumed something was in the works, yet a quick check with execs at many of the MSOs tells a very different story. Over the past week, I spoke to four different cable TV execs, three in the U.S. and one in Latin America, who all say no such deal is in the works. Add in the recent public comment from Comcast (NASDAQ:CMCSA) and that's five major MSOs who say the Reuter's story is "all noise".

Meetings between Netflix and the MSOs take place all the time and one cable TV exec told me that, "bundling was definitely on the table but discussions never went very far." Another said that, "in our many meetings with Netflix, the bundling of services is something that always comes up, but it is not something we are actively looking at". Cable TV executives has told me that the idea of bundling Netflix's service with their own is not new and that it has come up in their various discussions with Netflix, "over the past two years". The Reuters story made it sound like the idea of bundling was something new and called their story an "exclusive", but it's clear there is nothing new about the discussions at all. Each of the MSOs I spoke with reiterated that they have a clear strategy for video OTT and IPTV and are not currently working on any such bundling deals with Netflix.

Some suggested it would make more sense for Netflix to bundle their services with MSOs outside the U.S. in countries where credit cards aren't popular. That would give Netflix a way to charge for their services, through the MSO, who already has the relationship with the consumer. But a quick check with some of the major MSOs in these regions reveals no such deal is in the works. In a NYT story, which did a good job of questioning the news, they quoted Netflix as saying that Netflix's CEO comments about bundling were "futuristic."

Aside from the obvious content licensing questions around a bundled Netflix service through an MSO, cable execs also told me that they don't think that Netflix currently charges enough for their service to be able to share with the MSO the kind of revenue split they would want. One cable TV exec said, "at $7.99 a month, Netflix does not have a lot of revenue to share with any cable operator. Netflix would need to charge more per month to be able to give MSO's a few bucks per user". Those I spoke with all suggested that Netflix would also have to acquire a lot more original and exclusive content in order for such a service to even make sense.

Adding all of these details up, it appears that Netflix's desire to bundle their service with cable TV operators is just a wish for now, with nothing in the near-term taking place.

Source: Multiple Cable Operators Say They Are Not In Talks With Netflix To Bundle Services