Why Comcast Called Out Netflix 283 Times to the Feds
Comcast mentioned Netflix 283 times in last week's 321-page filing with the Securities and Exchange Commission, defending its proposed acquisition of Time Warner Cable (TWC). It's odd to see a single company mentioned that often. Three words more important to Comcast's proposal -- "competition," "monopoly" and "antitrust" -- combined aren't mentioned as often.
Battle of the Brands
Netflix CEO Reed Hastings isn't afraid to make enemies. It's actually an essential trait when you're trying to be a disruptor. Offering a stand-alone streaming service that doesn't require a hefty cable or satellite television package is going to draw its fair share of critics, and Netflix hasn't had a problem calling out traditional platforms in the past.
Most media reports play up that Comcast and Time Warner Cable combine for 33 percent of the country's pay-TV market, but they also combine for a 36 percent chunk of the broadband market. This is a big deal for Netflix since cord-cutters kissing their fat cable bills goodbye often continue to rely on these companies for the connectivity to stream Netflix's growing catalog.
In a brilliant move nearly two years ago, Netflix began to publish monthly connectivity speeds of the country's leading Internet providers. As speeds for Comcast customers declined sharply through 2013, Netflix could rightfully argue that the cable-TV giant was trying to make its streaming service less attractive to Comcast customers. It worked. Netflix and Comcast agreed on a deal to improve the Netflix experience for Comcast's Xfinity customers, but it didn't come cheap. Speeds may have improved since bottoming out late last year, but Netflix doesn't want to see Comcast become even more powerful.
Let's Make a Deal
Comcast and Time Warner Cable are shrinking in the realm of pay TV. Comcast closed out 2013 with 305,000 fewer video customers than it had when the year began, and the smaller Time Warner Cable suffered a more brutal 833,000 in net defections. That's a total decrease of 1.138 million pay-TV customers. Many moved over to satellite television, AT&T's (T) U-verse and Verizon's (VZ) FiOS, but many others decided that enough was enough. Industry tracker SNL Kagan reported that pay-TV customers fell by 251,000 in 2013.
This isn't a fluke. Comcast has experienced sequential declines of video customers in 27 of the past 29 quarters.
As Comcast and Time Warner Cable fade, Netflix's popularity is growing. It topped 50 million global subscribers at the end of June, and it was expecting to close in on 54 million by the end of September.
This is also probably a big reason for Comcast calling out Netflix. After all, it may be true that the combination of Comcast and Time Warner Cable will create a behemoth in cable television, but even the 33.5 million combined video customers at the two companies when the year began is no match for Netflix's reach worldwide.
There are plenty of companies beyond Netflix that have voiced their concerns about a Comcast-Time Warner Cable pairing. It won't be an easy deal for the pay-TV giant to push through. The drama merely makes the entertainment nuptials just that much more entertaining.
Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. Check out our free report on high-yielding dividend stocks.