October 03, 2015
Earlier this year, Comcast hit a pivot point that shows just how much its business is transforming: cable ceased to be the top product for America's largest cable provider.
In May, the company officially had more subscribers for high-speed internet than it did paid-TV customers, more than a quarter of whom said they were dissatisfied with the cable service.
The trend toward online streaming services like Netflix, Hulu Plus and Amazon Prime Video is among the reasons why federal regulators ultimately blocked Comcast's proposed $42.5 billion merger with Time Warner Cable. The deal would have put 60 percent of U.S. broadband Internet in the hands of the two companies.
Writing for Fortune, S. Kumar argues that to win back its TV viewing base, Comcast should make a run at buying Netflix, which has grown to 42.3 million subscribers in the United States since it was established in 1997.
If Comcast wants to be a key player in video streaming, it could spend just as much time and resources building up its own base, or it could consider buying Netflix.
Buying would be the better option to expand Comcast’s presence in the streaming arena with a pre-built platform and powerful brand already popular with consumers. It would also be in Comcast’s interest, given the acceleration of cord cutting.
Netflix is currently valued at $28 billion, a figure that nearly matches the $30 million market value for CBS. Wall Street investors predict the company's earnings to increase by 40 percent a year on average for the next few years. With that kind of growth, a pact with Comcast may seem unappealing in the short-run.
But with the growth of other streaming services keeping pace -- 40 million Amazon members have free access to Prime Video, Hulu Plus is climbing toward 10 million subscribers and HBO now has its own independent streaming service -- a move like this could eventually make sense, particularly with Comcast targeting a younger demographic.
Netflix, meanwhile, despite its stellar lineup of in-house shows, still relies on hits coming from major networks. It's expected to report sales of $7 billion in 2015, according to CNN Money, a number less than half of CBS' projected revenue. A more sizeable revenue stream would enable the company to expand investment in original programming.
Kumar argues that Comcast -- already a part owner of Hulu, which distributes NBCUniversal's shows online -- should nonetheless consider making a move for Netflix amid a market downturn.
Read more at Fortune.
