Reuters: Netflix In Talks For Cable Partnership

Following some off-handed comments by Reed Hastings last month, rumors have been swirling regarding Netflix's potential relationship with cable providers. Today, reporting for Reuters, Yinka Adegoke and Lisa Richwine write:

Netflix Chief Executive Reed Hastings has quietly met with some of the largest U.S. cable companies in recent weeks to discuss adding the online movie streaming service to their cable offerings, according to sources familiar with matter.

In an increasingly competitive market, maneuvering to ensure greater visibility and ubiquity is certainly a cosmetically intelligent decision. Of potentially greater importance, however, is the implication this may hold for Netflix's impact on the bandwidth of the end-user:

Offering Netflix through a cable package could help the streaming service avoid a separate potential clash with cable operators over rising costs for online video traffic over their Internet pipes. Cable operators are the dominant high speed Internet providers in the U.S. and have been trying to devise methods to manage their costs and traffic of online video.

Netflix - long perceived as the means for the downfall of cable - is being getting into bed with its ideological enemy. Perhaps metered Internet usage is an inevitability, but the necessitation of such a deal strikes me as entirely distasteful.

I'm in favor of a robust and ubiquitous means for distributing on-demand content, but this seems principally problematic to me. The problem is not that there isn't any sense to such a decision - there is plenty - what bothers me is the unattractive prospect of such an alliance.

You might argue that Netflix is simply supplanting itself into hostile waters to further facilitate the fall of cable. There is a great deal of merit to such a perspective but, having said that, I tend to air on the side of pessimism. With a fluctuating stock price, the disaster of 2011 behind it, and its movements toward original content pressing onward, Netflix is obviously targeting HBO and its business model. Rather than existing alone and apart, Netflix is angling to become a premium tier of your cable service.

The problem with such a decision, in my eyes, is that the potential of Netflix extends far beyond the bounds of cable. HBO clearly feels threatened by Netflix's presence and, with original content, Netflix stands a fantastic chance of undercutting the relevance of cable and forcing HBO out of the cable-exclusive waters. But, under pressure, Reed Hastings appears to be embracing a somewhat skewed plan in favor of the cable providers he originally sought to undermine.

I have long supported Netflix but this move cuts away at its core structure of beliefs, and that is an awful shame.