Comcast ‘Confident’ About Deal With Time Warner Cable Following Opposition From Netflix CEO

Programming expenses increased 8.8 percent in Q1, said Angelakis. This was driven by increases in retransmission consent fees, higher sports programming costs and step-ups for recently completed long-term agreements, he said. “We expect programming costs to grow at about 9-10 percent for all of 2014.” The company is offsetting that with an improved product mix, adding more high-speed data, voice and business service customers, and upgrading existing customers to higher service levels, he said.

Comcast is open to allowing content aggregators on its X1 platform as long as it’s a “win-win” for customers, said Neil Smit, Comcast Cable president. Comcast is “open to the possibilities,” he said. A number of the apps are getting a lot of use, he said: “We're going to continue integrating more functionality into the X1 experience to make it more personalized for the viewer.” The company adds 15,000 to 20,000 X1 boxes per day and it’s advertising the rollout of its new Xfinity TV app that allows users to stream the entire TV lineup and watch DVR recordings, Roberts said.

Comcast revenue increased nearly 14 percent in the first quarter of 2014, compared with a year earlier, the executives said. Video customers increased by 24,000. Comcast added 383,000 new data customers and voice customers grew by 142,000. It also reported a 3.2 percent increase in its core cable advertising, they said. NBCUniversal revenue increased 28.8 percent due in part to the Sochi Olympics, they said.

The Comcast executives didn’t comment further on Netflix’s opposition to the pending merger during the call. In a letter to shareholders Monday, Netflix executives expressed concern over the largest ISPs driving up costs (CD April 22 p13). But Netflix’s opposition “is based on inaccurate claims and arguments,” a Comcast executive said in a statement on its website (http://bit.ly/1jybPoY). Netflix should be transparent “that its opinion is not about protecting the consumer or about Net Neutrality,” said Jennifer Khoury, senior vice-president-corporate and digital communications. It’s about improving its business model “by shifting costs that it has always borne to all users of the Internet and not just to Netflix customers,” she said.

Netflix’s opposition to a Comcast/Time Warner Cable deal is significant, some observers said in interviews. Comcast’s immediate response indicates Comcast takes it very seriously, said Howard Homonoff, a media content distribution consultant. Given Netflix’s role in over-the-top and online video, as well as independent content production, it’s a significant voice, Homonoff said. But “I don’t think it’s automatic that others will come out of the woodwork now,” he said. Everybody does an individual calculation, he said. Netflix’s decision to announce its opposition “doesn’t mean that somebody else, for their situation, is going to now change their mind, and that there’s nothing to lose, by coming forward,” he said.

Netflix has original programming, and it’s moving beyond just being a giant video library, said Bruce Beckner, a Garvey Schubert cable attorney. The objection most likely to get traction is the one that focuses on these companies as Internet access providers, he said. One might say that Netflix is positioning itself “to get some strings attached to any approval of the transaction by the FCC” to ensure that its programming doesn’t get disfavored in its share of bandwidth to a customer, he said. “It’s possible Netflix’s decision to outright oppose the Comcast deal might provide cover for other wavering companies to do that, too,” said Paul Gallant, a Guggenheim Partners analyst. “But my guess is each company makes a private cost-benefit calculation of getting involved, and that largely isn’t affected by who else is opposing a deal.”