A report from The Street asserts that there is little chance of Netflix, Inc. (NASDAQ:NFLX) offering its services as part of cable packages in the medium term. The piece, which was authored by Rocco Pendola, says that Netflix is not coming to Comcast Corporation (NASDAQ:CMCSA) or Time Warner Cable Inc (NYSE:TWC) services any time soon. The piece flies in the face of a recent narrative that has been following the company.
Pendola appears to be pretty skeptical when it comes to Netflix, Inc. (NASDAQ:NFLX). He says “Don’t put much stock into what comes out of the mouths of Netflix CEO Reed Hastings and his top lieutenants.” She reckons that there are always ulterior motives at the streaming company, and that they have led investors down the wrong path in the past.
Netflix cable streaming
Last week stories began to emerge that Netflix, Inc. (NASDAQ:NFLX) would join up with Comcast Corporation (NASDAQ:CMCSA) and Time Warner Cable Inc (NYSE:TWC) in order to offer its streaming services as part of a package offered by the companies. Pendola says that is not going to happen.
According to his piece, the talk of a Netflix / Comcast deal was spread by Netflix executives in order to steal publicity from HBO. He admits that this is conjecture and speculation, but he says it is well-informed at the same time. There are reasons that investors should be wary of Netflix from the get-go. The firm trades at more than 250 times 2012 earnings.
There are technological problems that are preventing Netflix, Inc. (NASDAQ:NFLX) from offering its services on cable set-top boxes. Those problems, which have been raised by Netflix itself, are overblown. According to Pendola there simply isn’t a reason for Comcast and Time Warner to offer Netflix.
For now, the whole idea of Netflix, Inc. (NASDAQ:NFLX) jumping to cable in any meaningful way is silly. The company may manage to do one or two smaller deals, but they will not change its business.
The argument boils down to a simple look at incentives. Netflix, Inc. (NASDAQ:NFLX) might enjoy becoming part of the traditional media, but Time Warner Cable Inc (NYSE:TWC) and Comcast Corporation (NASDAQ:CMCSA) have no reason to let the upstart in on their turf. Netflix won’t become a force in cable because it won’t benefit the providers.
Cable is finally catching on to the dangers that Netflix, Inc. (NASDAQ:NFLX) brings with it. They are designing their businesses around those dangers. If they try to crush the streamer, there might be little the company could do to stop them.