Seeking Alpha

Broadband providers get a leg up as Netflix ends standoff with Comcast

  • In what could be a landmark pact for its dealings with other broadband providers, Netflix (NFLX) agrees to pay Comcast (CMCSA) to ensure its shows stream smoothly to the cable operators' customers.
  • The debate: Who should bear the cost of upgrading Internet networks to carry the growing volume of online video - broadband providers (like Comcast) or content companies (like Netflix). While some big content names have begun paying the providers for faster and smoother access, Netflix - until now - has been a holdout, and today's agreement likely paves the way for similar deals with major broadband companies like Verizon (VZ), AT&T (T), and Time Warner (TWC).
  • The agreement, of course, comes just days after Comcast agreed to buy TIme Warner in a deal which would make it by far the largest provider of broadband in the U.S., and it removes one potential regulatory issue hanging over the acquisition.
  • Press release
  • From Friday: Signs point to a Netflix/Comcast deal
Comments (34)
  • Mark Krieger
    , contributor
    Comments (3790) | Send Message
     
    hmm...they have to pay the man now to keep their streaming intact....how much is the fee? I wonder if this news will cause the stock to go up or down tomorrow?
    23 Feb, 09:18 PM Reply Like
  • investingInvestor
    , contributor
    Comments (1238) | Send Message
     
    This is a game changer. Just sit down and kiss your Internet goodbye.

     

    First, the ISPs charge you for either wired or wireless access to their networks.

     

    Second, the ISPs charge content providers for access to their networks.

     

    Third, the ISPs charge everyone for the privilege of experiencing useable network traffic speeds and caps.

     

    Fourth, the ISPs charge businesses for access to your Internet records.

     

    Fifth, the ISPs feed advertising to your Internet services.

     

    Sixth, the ISPs charge businesses for all commerce on the Internet.

     

    Seventh, the ISPs give tens of millions to politicians.

     

    Eighth, you finally wake up to realize ISPs have already been doing 1 through 7 all along and 20 US states already have laws that make competition against incumbent ISPs illegal and US judges already have ruled that the Federal government cannot regulate ISPs' networks, services, or fees.

     

    Ninth, ISPs blanket advertise that 1 through 8 never happened.

     

    Tenth, the EU takes over the global Internet.

     

    Test Question: In the US, when will the breakup of AT&T be mooted?
    24 Feb, 09:53 AM Reply Like
  • sethlemay
    , contributor
    Comments (197) | Send Message
     
    This is possible, but it is equally possible that fiber takes over, cities start offering free wifi service to all residents, and you barely ever pay for internet again and big businesses like netflix bear the brunt of data expansion expenses which will be embedded in their service price which is completely reasonable for data hogs like Netflix.

     

    As much as we hate to admit it California does first what other states eventually adopt including rapid hybrid car growth, medical marijuana, and likely next free connectivity.

     

    http://lat.ms/1fxDx5M
    24 Feb, 11:26 AM Reply Like
  • User 6549301
    , contributor
    Comments (2) | Send Message
     
    krieger sorry u lost millions on sstk short.
    25 Feb, 08:32 AM Reply Like
  • Patrick Young
    , contributor
    Comments (985) | Send Message
     
    Obviously the consumer of content will eventually pay the cost of the integrated cost of service. The Comcasts of the world have a poor track record of keeping up with demand for bandwith. Look out for Google! Cable television and Gigabyte-speed internet for what Comcast charges just for Cable? Uh-oh.

     

    (NFLX) possible (http://bit.ly/I2oi2V) acquisition?
    23 Feb, 09:19 PM Reply Like
  • chriff
    , contributor
    Comments (83) | Send Message
     
    it's too bad google can't just expand its gigabit service to all major metro areas within the next few years...
    24 Feb, 12:16 AM Reply Like
  • Jake2992
    , contributor
    Comments (825) | Send Message
     
    They could, but many local governments are being lobbied heavily by comcast to prevent this. This is why we need public financed elections to keep the plutocrats out of politics as much as possible.
    24 Feb, 09:47 AM Reply Like
  • sethlemay
    , contributor
    Comments (197) | Send Message
     
    This is typical. It is true that big business become to big to fail because of power and influence. We have all kind of known that deep inside, but it wasn't until our government slapped us in the face by bailing out big banks, and wall street, and actually told us "They are too big to fail". It told us what we already knew the government is in the pocket of big business. What was once covert is no overt, and it is now done shamelessly.

     

    Truly to be a politician one must bury one's consciousness as far as possible, and wake up telling lies to one's self in the mirror every morning so that one can the lie enough to successfully pass it off to the public.
    24 Feb, 11:33 AM Reply Like
  • embryorambo
    , contributor
    Comments (229) | Send Message
     
    Surprised no mention of the price paid. Wonder if it was a small say 10 million per year Token to make it look like both sides got what they wanted or if it was material to NFLX
    23 Feb, 09:51 PM Reply Like
  • Mark Krieger
    , contributor
    Comments (3790) | Send Message
     
    will this deal cause the shares to go up, go down, or have no impact?
    23 Feb, 10:05 PM Reply Like
  • chintan1671
    , contributor
    Comments (44) | Send Message
     
    I think stock will go down as nflx will have to pay extra $$'s to maintain customers and may be more $$'s if customer base increase which will reduce profit / customer
    23 Feb, 10:14 PM Reply Like
  • nguyenvanphuoc
    , contributor
    Comments (366) | Send Message
     
    "will this deal cause the shares to go up, go down, or have no impact?"

     

    Yes.
    24 Feb, 07:23 AM Reply Like
  • Sakelaris
    , contributor
    Comments (1227) | Send Message
     
    It will at least reduce uncertainty about the issue and that could be positive for Netflix in the long run.
    24 Feb, 08:03 AM Reply Like
  • Brad Kenagy
    , contributor
    Comments (1467) | Send Message
     
    Will this is in costs for NFLX, will that cause them to raise prices for streaming service?
    23 Feb, 10:10 PM Reply Like
  • Mark Krieger
    , contributor
    Comments (3790) | Send Message
     
    the fact that they didn't reveal the cost structure is disappointing (what do they have to hide?)-Wall Street absolutely loathes uncertainty
    23 Feb, 10:19 PM Reply Like
  • Slick E
    , contributor
    Comments (117) | Send Message
     
    And here I thought I was already paying Comcast to give me the internet at specific download speeds. I must have accidentally signed up for the "Everything but Netflix" plan, nice of Comcast to rectify that for me by extorting Netflix.
    23 Feb, 10:21 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3604) | Send Message
     
    I've said over and over that NFLX has limited bargaining power. They own almost nothing in the way of content-- they don't even own House of Cards btw-- and they own zero in infrastructure.

     

    The already cramped margins will continue to deteriorate...

     

    Best of luck to longs, you are holding a dud.
    23 Feb, 10:37 PM Reply Like
  • Zeus2012
    , contributor
    Comments (697) | Send Message
     
    Dude - you're not still short NFLX, are you?!!

     

    By the way, right now is the time to tactically short $AMZN & $LNKD. Think $LNKD has room to around $175. Have not looked @ $AMZN yet.

     

    There are some uncertainties around these 2 names given the recent quarter. But don't overstay your short. Currently short $LNKD via a put spread & will close out once it hits target (and may even go long).
    23 Feb, 11:00 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3604) | Send Message
     
    I was short NFLX on earnings- clearly a miss there.

     

    I have $170 Jan15 puts and $300 Jun14 puts. Adding more to the latter tomorrow morning.

     

    I have $170 and $120 LNKD Jan15 puts. I see them under $100 by year-end.
    23 Feb, 11:13 PM Reply Like
  • King Rat
    , contributor
    Comments (571) | Send Message
     
    Good luck on your puts. Many of the longs on both NFLX and LNKD (as well as certain others I won't mention here) are insanely priced.

     

    However:
    1) For every 100 shares purchased by a 21 year old who yells "I'm a genius" when NFLX,LNKD, etc. rises a dollar and cries "conspiracy" and "retarded analysts" when the stock falls, there are tens of professionals pouring in 10000+ shares.

     

    2) I would not touch NFLX or LNKD with a 10' pole at these valuations, but I don't see technicals shouting "SELL" quite yet. OOM puts are extremely time sensitive and you lose money every second of every day even when the market's closed.
    OK OK, huge divergence of 10, 40wma, well-elevated above 10w, and MACD looking to reverse, but you are way OTM still. There are several ranges of support to break through in 4 and 11 months to get ITM.

     

    3) It is still hard to tell how much unprofitability is inability to monetize, and how much is high ROI reinvestment.
    It is as easy as it is wrong to switch COGS with R&D at least on paper.

     

    4) There is still a lot of irrational hope left in these stocks and irrational thinking is more robust than solvency.

     

    I think you have the right direction, but you need velocity there that requires a lot of unhappy info. Until we know the rates Comcast is charging, and how likely others will charge likewise, we don't know if this is a victory or defeat for NFLX.
    24 Feb, 02:57 AM Reply Like
  • alan ljl
    , contributor
    Comments (250) | Send Message
     
    NFLX, no content delivery+noinfrastruct... future free ride.
    This was inevitable, who ever heard of a free ride going on forever?
    23 Feb, 11:09 PM Reply Like
  • jsteinm1
    , contributor
    Comments (147) | Send Message
     
    I feel like we're on the down hill slide for internet in America....
    23 Feb, 11:52 PM Reply Like
  • BIG_BEN
    , contributor
    Comments (154) | Send Message
     
    Well that didn't take long. Net neutrality was shot down barely more than 1 month ago! I would expect more announcements like this from Netflix as more ISPs want a piece of that action.
    24 Feb, 08:46 AM Reply Like
  • James Sands
    , contributor
    Comments (1921) | Send Message
     
    Stock is up, Netflix is a great success story no matter what side of the investment fence you are on......
    24 Feb, 10:55 AM Reply Like
  • jumpnjoey77
    , contributor
    Comments (468) | Send Message
     
    I up over 300% with Comcast the last 4.2 years.
    24 Feb, 11:01 AM Reply Like
  • James Sands
    , contributor
    Comments (1921) | Send Message
     
    Congratulations on that one.
    24 Feb, 11:03 AM Reply Like
  • jumpnjoey77
    , contributor
    Comments (468) | Send Message
     
    Pay to play.
    24 Feb, 10:59 AM Reply Like
  • Teodor Rasa
    , contributor
    Comments (152) | Send Message
     
    NFLX expenses go up and of course! their stock goes up... I love it. This is the most irrational stock traded I've seen in a long time.
    24 Feb, 11:04 AM Reply Like
  • th3decider
    , contributor
    Comments (281) | Send Message
     
    Those of you whining about net neutrality fail to see the VERY obvious solution. Even the article above is very sad in its economic ignorance: "The debate: Who should bear the cost of upgrading Internet networks to carry the growing volume of online video - broadband providers (like Comcast) or content companies (like Netflix)." ----- hmm what about the logical choice, the consumers who use the most internet?

     

    The net neutrality argument would go away overnight if US consumers simply switched to paying for metered internet access like most of the world does and like almost all US consumers do with data plans for their phone. The whole issue of ISP's needing to "throttle" bandwidth from certain sites is due to the fact that some users would use 500gb to a terrabyte a month while people like my parents probably use at most a gig or two checking email and web browsing, yet they both pay the same monthly rate.

     

    Why the heck someone who uses 500 to 1000 times as much of a product or service should pay the same rate as everyone else is beyond me. Most likely it is due to a warped notion of us elevating unlimited internet access to some sort of human right, beyond the realities of economics. If people simply paid based on what they used, the whole argument would be gone because the answer to above question about who should pay to upgrade networks would be obvious: the people who use them the most.
    24 Feb, 11:14 AM Reply Like
  • BIG_BEN
    , contributor
    Comments (154) | Send Message
     
    One problem with your argument. Most ISPs have multiple speed tiers available to consumers. You already pay more for more speed (and therefore the ability to use more data per month). Your parents could pay for a lower speed plan for their simple web browsing. Those who pay for a higher speed connection expect to be able to use that extra speed to watch Netflix or other services of their choice.
    24 Feb, 11:23 AM Reply Like
  • rrobster
    , contributor
    Comments (119) | Send Message
     
    The ISP's should handle anything thrown them, Netflix included. They are making record profits and have no problems hiking their rates on a regular basis.
    24 Feb, 02:00 PM Reply Like
  • sethlemay
    , contributor
    Comments (197) | Send Message
     
    With this logic diamonds should be dirt cheap. The fact is that the De Beers cartel controls the supply even though supply far outweighs demand. Same thing here. Look sometimes we just get pissed on. Fair has nothing to do with it.
    24 Feb, 02:53 PM Reply Like
  • sethlemay
    , contributor
    Comments (197) | Send Message
     
    Thought this might be a fun read. If you won an olympic medal for market manipulation Diamonds would smoke gold and ISPs

     

    http://bit.ly/1hiPw7a
    24 Feb, 03:00 PM Reply Like
  • smithtrevor516
    , contributor
    Comments (6) | Send Message
     
    Terrible news is great news yet again! That 241 P/E looks solid given that the other monopolist vultures ISPs are circling.

     

    Where is Reed Hastings? Normally he's all over the MSM when there's good news to announce. Other than when he's worried about the stock being overvalued at $322 (10/21/2013).

     

    24 hours later and still "no terms disclosed" = +3%

     

    Sure feels like we're all going to be rich forever....
    24 Feb, 02:49 PM Reply Like
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