Comcast and Netflix Shack Up

Back in November 2015, we put forth the idea that it made a world of sense for the MVPDs to start offering the Big 3 streaming services as part of their pay-TV line-up. And lo and behold, it came to pass this week that Comcast is going to put Netflix on their new X1 boxes.Details are still fuzzy—will Netflix be offered, like HBO, as an add-on to the regular pay-TV service or will users need to strike a separate deal with Netflix? (The former would make much more sense.) Will Netflix shows be featured in the program guide? And are other deals, with Hulu and Amazon in the works?

Why It Matters

So many, many reasons why this matters. Time to make a list.

1. Cord Cutting.  Is this the end to cord cutting? Maybe. If cord-cutting is all about getting rid of pay-TV packages to save money, then it seems easy enough for Comcast (and other MVPDs) to start offering “Cord Cutter” packages with Netflix, Hulu and maybe HBO and Showtime bundled in. That way they get to keep you inside the Comcast ecosystem where they can try to upsell you on a basic cable package and other extras. Regardless, it expands the notion of what we consider to be pay-TV and makes the whole notion of cord cutting seem quaintly early 2010s.
2. Net Neutrality and Fairness. Will bandwidth consumed via Comcast-sanctioned Netflix viewing count towards bandwidth caps? If not, is that fair to other streaming services? Does putting Netflix on the cable box give them an unfair advantage over new streaming services whose users will have to go the Roku/Chromecast route? What about Amazon and Hulu? Will those services lose out if Netflix is the only one allowed access to the set top box?
3. Unlock The Box/Ditch The Box. Several months back, FCC Chairman Wheeler set forth a proposal to “unlock” the set top box and allow third party manufacturers to supply their own set top boxes. The nation’s MVPDs all cried bullshit, claiming that the only “third party” that would benefit would be Google, who already had set top boxes in place from its Google Fiber operation and would use said boxes to gather information about viewers and further secure its monopolistic control over the ad market. Sensing an opportunity with a split FCC, the MVPDs recently put forth their own counter-proposal, called “Ditch The Box” wherein they promised to do just that—ditch the set top box in favor of a series of HTML 5 apps that would work on smartphones, tablets, smart TVs and streaming boxes like Roku, Apple TV and Chromecast.  So where does that leave either proposal? If you’re unlocking the box, it stands to reason that the box with Netflix on it is going to be the box that everyone wants and that sort of defeats the whole purpose of unlocking it. Similarly, if you’re ditching the box, what’s the point of investing money on integrating Netflix onto your box? Or is the point that the HTML 5 apps will all have Netflix integrated as well. Though if those apps live on Roku or Chromecast, there seems much less point: users won’t have to keep switching inputs and may actually prefer the Netflix standalone app to the Comcast-integrated one.
4. Billing and Marketing. Is Comcast going to start selling Netflix directly to its customers the way it sells HBO? What sort of cut will they get if they do? Will “get three free months of Netflix when you sign up for Comcast” become part of their marketing spiel? What does Comcast get out of it—will Netflix make shows that are exclusive to Comcast subscribers?
5. Replication.  When the nation’s largest MVPD strikes a deal with Netflix, it makes national headlines. It also puts a lot of pressure on the other MVPDs to follow suit, with Netflix and with Hulu and Amazon. Cablevision already has a deal with Hulu, but we suspect it won’t be long before all the major MVPDs have deals with the Big 3. Or at least one of them.
6. Hulu’s Impending Streaming Service. If the MVPDs are putting streaming services on their set top boxes, how does that affect the prospects of Hulu’s new V-POP (virtual pay-TV operator) service? It would seem to make it harder for them to succeed, as fewer people will be using streaming devices (unless device-based HTML 5 apps are how the MVPDs will integrate streaming services.) That’s just another piece that needs to be ironed out.

What You Need To Do About It

There’s not a lot you can do now, other than sit back and follow the news and see how all the issues raised above play out.Though if you’re an MVPD, you really needed to be in negotiations with the Big 3 streaming services yesterday. If that’s not happening, get on it right away. 

2. Facebook Live Gets Real In A Hurry 

While Facebook thought Live would be used to record fun, light things like birthday parties and tailgates, users have a way of frustrating even a billion dollar company’s best laid plans. And so the death of Philando Castile, who was shot by a police officer outside of St. Paul, MN, broadcast over Facebook Live, suddenly put the service in a whole new light.

Why It Matters

Facebook needs to realize that Live is going to be used to record lots of events that take the social network out of its comfort zone and with that comes responsibility and fallout. So that the very system they’d like to get 17-year olds to play the guitar or do stand-up on is also going to become synonymous with controversial news stories and all that implies.

What You Need To Do About It

If you’re thinking about using Facebook Live for your brand or your show, understand that many people may have a different impression of what it should be used for and factor that into your decision, particularly around how you market it.