Netflix-Comcast Deal: What’s Behind That Curtain? (NFLX)

Netflix and Comcast, while both aim at delivering quality home entertainment to subscribers, do so in drastically different ways. From this angle of impossibility, if you will, it’s quite interesting to see how these two erstwhile adversaries have finally agreed to work together.

The contentious relationship between Netflix (NASDAQ:NFLX) and Comcast (NASDAQ:CMCSA), which culminated with Netflix opposing Comcast’s bid for Time Warner (NYSE:TWX), as well as Los Gatos’ criticism of Comcast’s data caps and its request to the FCC to take action against home Internet data caps in general, is definitely an interesting one to look at in the world of corporate rivalries. Further, while Netflix delivers video content through online means and allows users to pay for and view the TV shows that they want, Comcast is primarily a cable TV service which requires users to pay a more substantial fee every month while allowing subscribers to watch as many shows as they want. These truly contrasting methods of content delivery that these two former bitter enemies employ makes it very hard to imagine that they could actually join forces. However, reports indicate that this may not be the case anymore.

Apparently, recent behind the scenes talks between video streaming service Netflix and cable giant Comcast have been going rather well, which is definitely a big surprise considering that not long ago they were at each other’s throats. What’s more is that these talks have actually materialized in a deal and there is word that within the week Netflix’s entire catalog will be available in Comcast’s Xfinity X1 devices.

With this agreement, Netflix will come as one of Comcast’s cable channels, allowing X1 subscribers to view Netflix exclusive shows like “Orange Is the New Black” directly from their set-top boxes. It should be noted here that there is always a chance that both companies are talking about more than just a cable-box partnership. But only time will tell.

In the meantime, to some, it can be very intriguing how these two once bitter rivals were able to find common ground. However, when looking at AT&T’s $85 billion blockbuster deal for Time Warner which has certainly shaken up the media landscape, one can easily say circumstances are in a way forcing Comcast and Netflix to put behind their differences and work together so that they can stay relevant in the extremely fast-paced TV content delivery market. In fact, by partnering with Comcast, Netflix could potentially sign up to 5 million new net additions in the U.S., according to an analysis by Cowen’s John Blackledge.

Netflix is a truly revolutionary online service and has certainly changed the way that people view their TV shows. However, there has been a lot of pressure from investors with regards to the service’s ability to bring in more subscribers considering the cost for content has been rising. Also, the company failed to meet its new subscriber goal last July, which caused several downgrade ratings on its stock. Strong competition from similar services like Hulu and Amazon (NASDAQ:AMZN) means that Netflix can really use the potential subscriber boost that they can get from Comcast. In comparison, by fully integrating Netflix into X1 set-top boxes directly, the Philadelphia-based cable giant gets to keep consumers more within its own ecosystem.

Online streaming of TV content is versatile and convenient which is one aspect that Comcast can find it difficult to compete with. However, if the cable company is able to gain access to Netflix’s amazing exclusive shows like the aforementioned “Orange is the New Black” along with “Narcos” and “House of Cards”, there is much lesser chance that subscribers will completely switch from their cable TV setups to a more streaming-centric TV experience.

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