The 3% jump in early trading stands out on a morning when most stocks are down. Investors are intrigued by weekend reports led by one in The Wall Street Journal that Netflix is talking to cable companies including Comcast about the possibility of making the streaming service available on their set top boxes. The company already has an arrangement like this with Virgin Media in the UK. But the U.S. is a different story. The Journal notes that talks “are in early stages and no deal is imminent” citing “people familiar with the matter.” Pay TV companies have seen Netflix as a rival. It will take a lot to persuade them that it won’t encourage subscribers to cut the cord with cable or satellite TV — or watch Netflix instead of their VOD services. Indeed, last week Liberty Media’s John Malone — the largest shareholder in Charter Communications — urged cable companies to develop their own broadband alternative to Netflix. Brean Capital’s Todd Mitchell says that he doubts Netflix will make much headway with large operators such as Comcast — but might with small ones that “are moving away from managing their own on-demand libraries.” Some are offering subscribers broadband-connected TiVo DVRs in place of a conventional set top box. There’s a school of thought that operators can put up with some video cord cutting if Netflix encouraged more people to subscribe to their highly profitable broadband service. What about Malone’s call to arms? “We cannot help but think he might be bargaining in public with Netflix and TiVo with regard to a next-gen video offering for Charter,” Mitchell says.
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