Comcast to Add Netflix to Its Set-Top Box

Comcast Corporation (NASDAQ: CMCSA), the owner of the NBC TV network, has made a deal with Netflix, Inc. (NASDAQ: NFLX) to stream Netflix services through its X1 set-top box. The Netflix content will be available to customers later this year. Shares of Netflix jumped up from $94 to highest $101.21 after the news release on 12:04 pm, Tuesday.

Comcast and Netflix confirmed this deal in a statement and said they would offer “seamless access to the great content offered by both companies.” Comcast has been adding features to its X1 service in a bid to retain subscribers, who have increasingly gravitated to online video offerings from companies like Netflix and Hulu.

Moreover, Netflix has pursued set-top box integrations for years to make it easier for cable customers to access its services. Currently, people usually have to juggle remotes and switch to alternative streaming devices like the Roku or Apple TV to watch Netflix movies and shows on their TV sets. In cooperate with Comcast would give Netflix easier access to a wide base of cable TV customers as its U.S. growth is slowdown.

Comcast and Netflix didn’t disclose deal terms. Typically, Netflix pays a one-time “bounty” and small recurring monthly fee for new subscribers that sign up through an operator’s set-top box, the Journal has previously reported. In at least some cases, operators don’t receive a cut of existing customers’ Netflix bills.

Morgan Stanley’s Benjamin Swinburne discussed some of the possible financial arrangements of such a deal: “We would expect Netflix to give up some economics, similar to other distribution partners like Apple or TiVo but we do not believe it would meaningfully alter the direction of Netflix profits over time. Payments to distribution partners are reported in marketing expenses on Netflix’s consolidated financials.” He did note that Comcast’s pay-per-view business could be impacted, though not significantly.

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