Netflix has challenged the once-dominant cable model. The streaming service has altered how millions of people watch TV and it has proven that quality programming need not come from traditional sources.
That's bad for the traditional business of companies like Comcast which has driven its profits through cable subscriptions. But while it seems like the streaming leader has been nothing but a thorn in the side of the cable industry, it has actually been a mixed blessing, according to Comcast senior executive vice president David Cohen. The executive pointed out at a recent conference that the streaming service has actually helped drive two of cable's most profitable business areas broadband Internet service and content licensing.
That's a remarkable case of seeing the glass as half full, but it's a correct read on the situation. Netflix has absolutely changed how Comcast and its rivals do business, but not all of those changes are bad for the companies.
Unbreakable Kimmy Schmidt was ordered to series by Comcast's NBC which ultimately made a deal for it to go to Netflix. Source: Netflix
What Cohen said"Netflix is the ultimate frenemy," Cohen said at a panel session at the New England Cable & Telecommunications Association annual conference. He explained that while the streaming service may take away cable customers, those users still need reliable broadband in order to use it.
"Remember, you can't get Netflix without broadband service," Cohen said while talking about the subscriber gains Netflix announced recently. "Those are 3 million customers of our broadband service."
In addition to noting how Netflix could actually enhance his company's broadband business, he also pointed out how the streaming service has enhanced the market for Comcast's content library.
Winter may be comingWhile Cohen painted the existence of Netflix as a negative and a positive for his company, he seemed more concerned about rivals offering skinny bundles on a pure digital basis likeDISH Network's Sling TV. Those packages, which allow customers to buy fewer channels for much less money are not pure a la carte offerings, but they do undercut cable's pricing while cherry picking some of its most popular channels.
"Part of this is a self-inflicted wound," Cohen said. "We have made video too expensive."
Of course, even Sling TV and Sony's PlayStation Vue pure digital packages require quality broadband, so Comcast and big cable win for losing.
It's about accepting realityCohen, unlike many cable executives, seems to understand that you can't put the genie back in the bottle. Netflix exists and it, along with other emerging options, will take market share away from cable. That's a trend that's impossible to stop and one which big cable has to embrace.
Working with Netflix can be good for Comcast. Cohen understands that there's no way to freeze out the streaming leader so it needs to sell its content and make money from its customers by selling them broadband.
Down the road it may not be crazy to envision even larger partnerships -- perhaps a digital cable skinny bundle being coupled with Netflix. They may only be frenemies, but Comcast and Netflix can make money together. Cohen is smart enough to realize that his company needs to move forward in the market that exists today, rather than attempt to turn back the clock.
Cable won't be a monopoly again and Netflix is not likely to disappear. That's good for consumers, but it does not have to be all bad for the cable companies.
The article Comcast Exec: Why Netflix Is Cable's Ultimate Frenemy originally appeared on Fool.com.
Daniel Klinehas no position in any stocks mentioned. He watched every episode ofKimmy Schmidt.The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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