Analyst Sees Cable Giants Moving Onto Netflix's Turf

Netflix started off renting DVDs by mail but recently began offering instant content via live streaming on the Internet. That got the attention of Time Warner, Comcast and other content providers, who suddenly realized Netflix could deliver much the same content they were selling at a fraction of the cost.

At least one of these cable giants has apparently decided to fight fire with fire. Verizon, which provides video content via FiOS, may be poised to launch a new Internet video service that would go head to head with Netflix.

Tony Wible, Director of Entertainment and Digital Media at Janney Montgomery Scott, made the prediction Tuesday in a note to investors. As an analyst at Janney Montgomery Scott, Wible not only follows industry developments at Netflix, but also Time Warner, Disney, Viacom and other large media firms.

A catalyst

If Verizon were to launch such a service, Wible said it would be a catalyst for other media conglomerates to jump on board as well. To date, he notes, no cable or pay-TV provider has tried to market its content outside its original footprint. But it would be a simple matter for these companies to set up subsidiaries that could offer web-delivered content in addition to their other, more expensive services.

A basic cable TV service usually starts around $30 a month and can easily be more than $100 a month when premium channels and services are added. A Netflix subscription, on the other hand, is $8 a month.

Verizon has yet to formally announce a web service and did not comment on Wible's prediction.

If Verizon were to follow through on the new service, the timing might be to its benefit. Netflix stumbled badly over the summer when it split off its DVD-by-mail service from its web streaming access, in what amounts to a 60 percent rate hike.

Unhappy customers

Many customers were angry at the rate hike, and also unloaded on the company for other issues, like DVDs that didn't play and a new web browsing feature.

"Aside from having to deal with this new, completely unfriendly browsing feature, I too, am pretty annoyed with their price hike," Hanna, of Lynnwood, Wash., told ConsumerAffairs.com back in September. "This is your business, Netflix. How hard is it to actually keep things consistent? More importantly, how hard is it to get a little progressive and allow streaming for ALL the movies? One month a DVD is available for live streaming, then the next, it's back on the DVD list. And I can't ever get through their customer service number to complain!"

In October, a ConsumerAffairs.com computerized analysis of about 4 million consumer comments on Facebook, Twitter and assorted blogs found the company's approval rating continuing to plunge - from a 60 percent approval rating down to 14 percent.

Consumers aren't the only ones who have been unhappy lately. Investors have also punished Netflix. Earlier this year Netflix stock hit a high of $304 per share, but today is trading at around $70.