Thursday, October 30, 2014

Netflix CEO to Comcast: Stop poor mouthing us

It's safe to say Reed Hastings doesn't believe that the costs of delivering Web video to Netflix customers is a financial burden to Comcast or other networks.

Netflix's public-relations team almost walked away today from a San Francisco tech conference without its CEO saying anything that might complicate its job.

Reed Hastings is becoming quite the firebrand. He made fun of Comcast's claims that it costs the company a lot to deliver video to Netflix's customers.

(Credit: CBS '60 Minutes')

But it was not to be.

Minutes before wrapping up an on-stage interview at the Morgan Stanley Technology Media & Telecom conference, Reed Hastings made the kind of witty, impromptu, and controversial remark for which he's become increasingly famous.

Asked whether the cable companies are "pressured" by the enormous amount of traffic that Netflix customers generate, Hastings sarcastically said, "That 92 percent Comcast operating margin is really under a lot of pressure...There is no financial pressure on ISPs. They are making a fortune."

Hastings couldn't or wouldn't hide his skepticism about the high costs Internet service providers claim come with delivering Netflix videos over the Web.

The issue could impact Netflix customers, so here's the back story: Comcast wants to charge Netflix's content delivery network, Level 3, for the traffic that goes over its network. In response, Level 3 accused Comcast of trying to set up a delivery "toll booth."

The theory goes that since most of Level 3's traffic comes from Netflix, Comcast is trying to use its network to hamstring a competitor. Netflix and Comcast compete in the home entertainment market. Just last week, Comcast launched the Xfinity Streampix service, which offers Comcast subscribers the ability to access a large catalog of TV shows and movies online.

Comcast also owns NBC Universal, parent company of Universal Pictures. All the studios have a love-hate relationship with Netflix. This won't be the last we hear about this issue--especially with Hastings at the helm.

The bigger Netflix grows, the less guarded Hastings becomes. In December and January, Hastings made headlines by respectively suggesting that broadcast TV had peaked and that the DVD was kaput. Who could forget about his video performance last summer, during which he announced the ill-fated Qwikster service? He has said that this was not his finest moment.

Hastings has offered little in the way of news since the October cancellation of Qwikster, up until his crack about Comcast.

He said he thinks that one day cable will become an on-demand Internet platform. He played up the television series Netflix offers for streaming, likely because he's lost the licensing rights on a lot of movies.

Hastings also addressed his company's decision to slow down its overseas expansion and said operators in other countries are scurrying to prepare their own competing services in preparation. He said that while that may help rivals, Netflix is focused on branching out across the globe.

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