Is a Netflix acquisition next for cable companies?

Tom Dougherty, CEO – Stealing Share

18 February 2014

Could a cable company simply buy Netflix?

What does the runaway success of Netflix’s House of Cards mean to the broadcast and television industry? Could a Netflix acquisition by cable companies be next? Well, the recent announcement of a merger of Comcast and Time Warner Cable should give you a few clues.

This is just the start. 

Going way back to the FCC rules that dictated the behavior of US broadcast networks in the 60s and 70s demonstrated the shell game that has always been played between the public interest and the monopolistic model of unbridled greed. This was back when the networks ran 15 minutes of public interest broadcasting as an excuse so they could run those informative and educational shows that the corporate sponsors required of them like Gilligan’s Island, The Partridge Family and Lost in Space. We all knew that the broadcast licenses were awarded with a wink and a nod. The money has always followed the money and CBS, NBC and ABC had it and made buckets more of it.

“What is going to happen? I would expect nothing in terms of regulation until we all wake up and realize that our cable provider and content creator are one in the same and that getting programming directly from the content provider is the same exercise as getting coaxial cable into your house.”

 

netflix acquisitionSo what has happened since cable was looked at as a novelty for better reception? In a word—decentralization (to a point).

The idea of a new and expanding plethora of choice was supposed to be the free market equalizer. Instead, we ended up with a few cable companies with a monopoly map of non-competing providers. This model served the “haves” (vs. the “have-nots”) just fine until a few years ago we discovered streaming sports.

I remember the time well. It was March and I was able to stream live March Madness to my computer with an almost imperceptible loss of resolution. I began, along with a large population of the US viewers, to wonder if it would be possible to unplug the cable box and pocket the $150+ a month bill. After all, my family watched about half a dozen channels out of the 200 that cable made me buy in its package.

The cable companies began to anticipate their loss of monopoly as soon as we made unplugging an emotional possibility to garner programming directly from the content provider. The purchase of NBC/Universal by Comcast was a smart anticipation of the importance of owning content and not just the pipeline. The Comcast brand saw the future and grabbed at it.

Comcast and Time Warner don’t compete. They have no overlapping business unless you consider that Time Warner runs a ton of NBC/Universal content and Comcast runs a lot of Time Warner content (like HBO). But, what has happened is that time has suddenly shifted. It has contracted quickly. Every viewer of House of Cards is a customer at risk.

What is going to happen? I would expect nothing in terms of regulation until we all wake up and realize that our cable provider and content creator are one in the same and that getting programming directly from the content provider is the same exercise as getting coaxial cable into your house.

We won’t have choices. How long do you think it will be till one of the cable players makes a hostile bid for Netflix? A Netflix acquisition could happen. Go ahead and hold your breath, it really won’t be that long.

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