July 05, 2016
Philadelphia-based cable giant Comcast announced Tuesday that it will be integrating Netflix directly into the platform of its X1 set-top box before the end of the year.
The deal, first reported by Recode, represents a major agreement between two companies that have long been considered fierce rivals in a competitive and evolving consumer environment. A joint statement from Comcast and Netflix provides only a confirmation of the upcoming service:
“Comcast and Netflix have reached an agreement to incorporate Netflix into X1, providing seamless access to the great content offered by both companies. We have much work to do before the service will be available to consumers later this year. We'll provide more details at that time.”
In the past, the companies have clashed over issues ranging from net neutrality and streaming bottlenecks to the dropped Time Warner merger and interruption-free video content. Those complaints weren't limited to Comcast, but Netflix CEO Reed Hastings and Comcast CEO Brian Roberts publicly went at it in 2014 at the Code Conference a few months after a long-term deal was reached on bottlenecks.
Following Tuesday's announcement, a jump in Netflix stock signaled the benefits that could come to both companies as a result of integrating services.
ALERT: $NFLX jumps after @Recode reports Comcast will allow Netflix onto its X1 platform https://t.co/XY9AoYsf8o pic.twitter.com/0z1rUw61rQ
— CNBC Now (@CNBCnow) July 5, 2016
For Netflix, it's an influx of subscribers from a major provider on top of smaller deals already in place with Apple, Roku and Google's Chromecast. For Comcast, it secures a more comprehensive video app experience that can compete with services that now offer both Netflix and Hulu, which is part-owned by Comcast.
Last year, an analyst at Forbes went so far as to hypothetically suggest Comcast buy Netflix instead of competing with it. While the streaming giant is projected to increase company earnings by an average of 40 percent over the next few years, the emergence of rival platforms from Amazon, Hulu and HBO could eventually cut into that breakneck growth.
Since Netflix still relies heavily on major network shows to fuel its revenue, the argument went, it should be tempted by a deal with Comcast that would vastly expand investment in its own popular original shows.
Finally, while Comcast increasingly seeks inroads with a younger demographic – for example the company's $200 million investment in BuzzFeed – Netflix previously had a problem reaching older viewers, Morgan Stanley’s Benjamin Swinburne said in a report last month. About 81 percent of adults between 18 and 35 years old have a Netflix account, but subscriptions among those between ages 45 and 54 have increased 20 percent over the last two years.
That's a long line of speculation, but in the meantime, as U.S. regulators mount their scrutiny of cable set-top boxes, this agreement offers an obvious and overdue upgrade for Comcast's X1 customers.
