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Netflix talks stall on working with Time Warner Cable

By Cliff Edwards and Edmund Lee
Bloomberg News

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Netflix’s effort to secure a place for its video-subscription service on Time Warner Cable set-top boxes is on hold now that the cable operator is being sold.

The discussions are unlikely to progress before Time Warner Cable’s $45.2 billion acquisition by Comcast Corp. is completed, said people who asked not to be named because the matter is private.

Comcast, which isn’t as far along in its own talks with ­Netflix, is focused on increasing film downloads and rentals with its new set-top box platform called “X1,” they said.

“They will not be in any kind of rush to let Netflix on their cable box and cannibalize their business,” said Arvind Bhatia, an analyst at Sterne Agee & Leach Inc. in Dallas who has a neutral rating on Netflix.

A deal with Time Warner Cable would put pressure on other pay-TV providers to offer Netflix as well. The video-streaming pioneer, with 44.4 million online subscribers, has pitched its Web-based trove of original shows, movies and older series as a must-have for pay-TV providers who increasingly poach each other’s viewers for growth. It has signed two European cable services and is trying to reach deals with smaller U.S. outfits that use TiVo set-top boxes.

Discussions have included the possibility of Netflix paying fees to cable providers, Chief Executive Officer Reed Hastings said in an interview in late January.

While Netflix can continue to grow without such deals, access on cable TV systems would make viewing easier by eliminating the need to toggle between cable and Internet services, Hastings said.

“Consumers already use Netflix on the smart TVs, their Apple TVs and their Rokus,” Hastings said last month. “For us, it’s not a financial decision, it’s a customer-pleasing decision,” he said.

Jonathan Friedland, a spokesman for Netflix, declined to comment on the Comcast-Time Warner merger, as did Maureen Huff, with Time Warner Cable.

Steven Restivo, a spokesman for Comcast, said the company continues to talk to application providers about joining the X1 set-top box platform.

The X1 platform, which delivers content via what is called cloud computing, could evolve into an larger threat for online services like Netflix and offerings such as the Apple TV set-top box. It can be updated to duplicate many of their features, such as suggestions of what to watch, reviews and social tie-ins to Twitter or Facebook.

Comcast has more than 1,000 engineers working on software improvements for X1, said Sam Schwartz, chief business development officer for the pay TV provider, which finished 2013 with 21.7 million video subscribers.


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