Netflix-Comcast Deal Could Kill Roku and Apple TV

Hot on a run of reporting about online-video rumors, the Wall Street Journal is now reporting that Netflix and cable companies — most notably the nation's biggest provider, Comcast — are negotiating to add the streaming service as an app on cable boxes.

At first, this may seem counterintuitive: Why would a cable company encourage online video? But if it's tied to cable service, the cable (or satellite) provider would be partnering with, not yielding to, the streaming video powerhouse. "They're not really competitors. [Most] Netflix subscribers have cable or satellite," said Jeremy Toeman, CEO of online TV listings service Dijit Media. Plus, Netflix had negotiated very good deals with TV and movie studios that cable companies might want to take advantage of by partnering with Netflix. 

MORE: 5 Easy Tips for Buying an HDTV

"There's a certain number of consumers that don't want to have [separate] billing relationships for television," said John Buffone, an analyst who covers video devices for research firm NPD. "And they also want that channel to be available in the manner in which they've selected TV channels in the past."

In other words, there's no downside for a cable company to add a service that people want. Consumers clearly want streaming video — in particular, Netflix — so providing that could be a competitive advantage for a cable provider like Comcast, said Buffone. Data from NPD shows that 49 percent of households with a TV connected to the Internet subscribe to Netflix Instant, making it the most popular streaming service. And a July survey by AltmanVilandrie found that 76 percent of people who watch video online watch Netflix, versus approximately one-third who watch HBO Go, Hulu or Amazon Prime. 

Those high numbers also hint at what could happen to other online video services and set-top makers if cable companies embrace Netflix. For many people, online video equals Netflix. The first successful streaming set-top box, Roku, began as a Netflix spinoff that delivered only Netflix Instant. Roku now offers dozens of additional online services (or "channels," in Roku parlance), but Netflix remains the most popular. And Apple, which usually tries hard to push people to its own iTunes store, decided it had to offer Netflix on its Apple TV when it debuted. (Apple has since let in other services, such as Hulu.)

If Netflix, the killer app of online video, comes bundled with cable, how likely are people to go out and buy another HDMI-connected box to get Hulu, Amazon and other services? 

Furthermore, if Netflix succeeds with a cable deal, what's to stop Hulu and others from negotiating similar deals?

MORE: Best Shows on Netflix, Hulu, Amazon and Yahoo Right Now 

In other words, who needs a Roku or Apple TV? Even people who don't subscribe to cable or don't get the latest cable boxes have a way to get streaming video on their TVs — it's called game consoles. NPD's data shows that the Xbox 360 and PlayStation 3 are already the most popular ways, by far, for getting Netflix and other streaming services to the TV. They far outstrip Roku and Apple TV. The Xbox even offers Time Warner cable as a "channel."

In the near future, Apple TV and Roku might be seen as transition products, like the external modems that PCs once used to get on the Internet. (Now, there aren't even integrated modems, and increasingly, PCs offer just Wi-Fi.) 

That could be just fine for Roku, which isn't wedded to making boxes, anyway, and is looking toward integrating its software into other devices. "The next step for us is absolutely integration, full integration," Lloyd Klarke, Roku's director of product management, told Tom's Guide in a recent interview.

"The opportunity to sell a streaming Internet box into a home is shrinking," said Toeman, as the market is getting saturated. "If I was Roku I too would want to be getting myself into products. (Toeman, however, is skeptical about the chances of Roku getting its software into cable boxes.) 

That move would also beat the long-suffering Google TV (likely to be renamed Android TV) at its own game. The service has struggled for years to provide a universal search function on TVs, but it's piled on so many other screens and features, plus numerous service glitches, that it's failed to take off or get integrated into many smart TVs.

A Netflix/cable TV/Roku deal, or even just a Netflix/cable TV deal, could scuttle the wishful thinking of pundits who have for years been talking about how Apple would reinvent TV. Why wait for Apple when the companies that already control the content people want to watch can get together to reinvent TV on their own? 

Follow Sean Captain @seancaptain and on Google+. Follow us @tomsguide, on Facebook and on Google+.

Sean Captain is a freelance technology and science writer, editor and photographer. At Tom's Guide, he has reviewed cameras, including most of Sony's Alpha A6000-series mirrorless cameras, as well as other photography-related content. He has also written for Fast Company, The New York Times, The Wall Street Journal, and Wired. 

  • ubercake
    Shoot! If Comcast gets a hold of Netflix, they're definitely going to charge me more than $8/month.
  • jjarnts
    Comcast while a large provider, is not the only one that everyone uses. Plus, Roku has other channels and such that the cable box wont have. I use Netflix, HBO Go, and Amazon Prime and the roku is a great device for that. IMHO; it wouldnt hurt Roku/Apple TV that much.
  • remyj123
    And there are a few of us who just flat out refuse to use the crappy Comcast Cable Box with it's lousy menu and slow response. A Tivo with a cable card does everything listed in this story and more for about the same cost as renting the cable box and with the ability to stream music and video from my home computer network. The menus and response time are way better too.
  • chomlee
    I am actually shocked that Netflix is willing to negotiate with comcast. Why would you negotiate with a company that wants nothing more than to put you out of business? In terms of set top boxes, I dont think it will be an issue. I use my Rokus for other channels other than netflix and ultimately (if it wasn't for my wife needing to watch real housewives of %^$&*, I would get rid of my tv provider and watch everything online and record the main channels with an HD antenna.

    Comcast is trying their hardest to stop the online train. They along with DirectTV block access to HBOGO, and FOXNOW on Roku devices because they don't want to give people any excuse to get a roku device (knowing that it will eventually help in their demise). This could be another reason why they are willing to partner with Netflix. I am willing to bet that this partnership is merely an app on their new x1 box that will allow netflix customers to access their account.
  • JD88
    Comcast simply wants people to be reliant on their equipment and service. This stops people from deciding they they could get by fine without cable with only Netflix, Hulu, or other streaming services.

    Cable TV in its current form is quickly becoming obsolete and the Cable companies know this. The prices they charge are simply laughable. I can't believe how many people are willing to pay hundreds of dollars for service, only to be bombarded by advertising during about 30% of their watch time. That's like literally paying to watch advertising.

    My biggest concern is that Companies like Comcast will eventually lose most of their cable television services and become primarily an ISP. In order to make the extreme profits they are used, they might resort selling internet service on the basis of how much data is consumed, similar to the way the wireless carriers do.

    Hopefully Google can expand its fiber network before that happens in order to prevent them from doing so. If greedy companies like Version, Comcast, and AT&T get their way, expect to pay.
  • back_by_demand
    Much as the above doubters say Comcast hate Netflix, they are still business people and it makes sense to side with someone that can sell and distribute its products outside its normal sales area. Comcast doesn't exist in Europe, but Netflix is and they should get a bundle by having their shows there.
  • digitalgriffin
    Streaming Netflix might be a majority on XBox360 and PS3, but I gave that up. The Roku is slower, but it's not the power hog of a game console, and it doesn't require an Xbox Live membership to get access. Plus I get more channels on my Roku then Xbox.
  • bochica
    @Ubercake, it is a partnership, not a takeover/buyout/merger. Netflix will still be Netflix. Comcast will only be able to dictate what Netflix can do on their boxes, nothing more. Netflix can still do whatever the hell they want with their service if it were to go through.
  • Jackal830
    Wow, there is so much stuff wrong with this article.

    1) The Roku can do much more than just Netflix and Hulu
    2) Comcast doesn't service all of the country
    3) Are people going to pay separate cable box fees to have netflix on each TV? (A roku can be had for a one time fee of $50)
    4) People are dropping cable in record numbers, Nielsen says there are 5 million households that just antenna or no traditional TV.

    Sometimes I think the cable providers pay for these types of articles. Cable TV service is in the middle of dying a slow death. Cable companies try to slow it's demise by introducing cable Internet bandwidth caps and other questionable tactics to force usage, but it'll only work for so long.
  • somebodyspecial
    Cordcutters don't use cable, comcast, cox or others...JUST THE NET. For those and many like us, we just need a box to get what we want (or in some cases no box at all). This merely stems the tide for a few from jumping cordcutter, but the reason we CUT that cord is PRICE and 18mins per hour of commercials. The only way to lower the price and get around commercials is CUT OUT CABLE TV. Whether or not you buy a BOX, use xbox360 etc to get what you want after is not the point. The point is we're CUTTING CABLE TV in large numbers. Good luck comcast etc...LOL. I'm looking forward to a roku4 providing it gives more formats with different audio. Only about half our shows work so we end up using bluray for flash drive stuff. I don't have roku3, maybe it plays more DD5.1, DTS AC3 type stuff. It seems to only like mp3 audio though I haven't bothered to really test it much, since a bluray is right below it...LOL. We just pull out of roku, push flash into bluray and back in business :) But yeah, Roku has hundreds of channels if I'm bored of netflix. No need for cable tv.