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CHICAGO–Cable operators say they are happy to compete with Netflix. But they think the high cost of sports and live programming will ultimately keep Netflix out of the game.
During a panel discussion here today at the National Cable & Telecommunications Association’s Cable Show, Robert Marcus, COO of Time Warner Cable, and Michael Wilner, CEO of Insight Communications, a cable operator based in Kentucky, said that without live programming and sports Netflix and other over-the-top video providers will never be able to compete head to head with them. (The term “over the top” is used to refer to providers that deliver video over the Internet, i.e. Netflix and Hulu.)
“We are more than happy to take all competition,” he said. “But if they want to pay the price for the rights to sports and other live programming, they will have to charge more to make up for what they spend on those rights.”
For years, cable operators have blamed the rising cost of their TV service on programming costs. It’s been estimated that cable operators pay just under $4 of every $10 they take in selling video for channels like MTV, CNN, and ESPN. And those costs keep increasing, especially for live sports broadcasts.
“All sides of the equation are going up,” said Insight’s Wilner. “Programmers are paying more for the rights. And we as distributors pay more.” He added that Netflix and other over-the-top alternatives would have to pass those costs on to consumers.
Still, Wilner said that Netflix, Hulu, and other over-the-top streaming video apps offer consumers more choice.
“People can do whatever they want with their broadband pipe,” he said. “We will continue to package video service in a traditional manner as they have become used to…But consumers will have alternatives available. They can make the choice: ‘Do I want to pay $60 a month for this video package or pay less and wait for a later release on Hulu.'”
And both cable executives said that Netflix actually is good for business, because it helps attract more high-speed broadband customers.
“Netflix is an app that requires a fat pipe,” Time Warner Cable’s Marcus said. “So we are in favor of any app that increases the utility of our broadband service.”
