Streaming Wars: Comcast Challenges Netflix

Last year played witness to numerous stumbles that hurt Netflix’s (NASDAQ:NFLX) reputation as the nation’s leading streaming video provider, and now the flailing company is facing heightened competition for the average consumers’ streaming dollar. This week, Comcast (NASDAQ:CMCSA) launched Xfinity Streampix, its own streaming service that, like Netflix, will be available across a slew of Internet-connected devices.

Streampix will be accessible for free, at least for the time being, to users who have subscriptions to Comcast’s television, phone, and Internet plans, and will cost an extra $5 for customers who only subscribe to its cable service. However, though the Streampix service is decidedly less expensive than Netflix, it is only available to Comcast’s 22.3 million television customers, and despite boasting a very strong library of hit movies and television shows, it pales in comparison to Netflix’s 14,000 titles.

Nevertheless, the emergence of yet another strong, viable competitor forced Netflix’s stock down 4 percent this week, even as the company made steps to shore up its position through a new major content deal with The Weinstein Company. Under the terms of the deal, Netflix will gain streaming rights to the company’s documentaries and foreign language films, including this year’s leading Best Picture contender, The Artist. Though the silent Indie hit may be a niche product, such films are actually very popular with higher-brow (and typically higher-income) customers, who are more likely to use On-Demand and streaming services. The Weinstein Company’s English-language films, including as My Week with Marilyn, are presently covered by a separate deal with Viacom’s (NYSE:VIA)(NYSE:VIAB) Showtime network.

Besides acquiring new content, Netflix has also begun to focus on producing its own original programming. This month, Netflix debuted its first series, Lilyhammer, and has five more shows presently in the pipeline. Netflix has also been attempting to woo Colin Callender, a veteran executive at HBO, to aid in their original programming initiative.

However, out of Netflix’s many competitors — including Hulu (CMCA), Dish Network’s (NASDAQ:DISH) Blockbuster, Time Warner’s (NYSE:TWX) HBO, and an impending joint venture between Verizon (NYSE:VZ) and Coinstar’s (NASDAQ:CSTR) Red Box — Comcast has been the most aggressive when it comes to gaining new content. The company ironed out a fairly comprehensive deal with Disney (NYSE:DIS) in January that will give it access to many programs from the ABC and Disney television and film library.

Though Comcast has the option to take the already-licensed content beyond their television customer base, they claim that’s not presently their aim. “It is not at all our intention to compete with Netflix,” said Marcien Jenckes, the company’s general manager of video services. “This just makes our existing subscriptions more valuable.”

In addition to the announcement of Xfinity Streampix, Comcast stated that it will be launching new, independent channels targeted specifically to minorities. They include Revolt, which will be backed by Sean “Diddy” Combs and former MTV executive Andy Schuon; a joint venture from Factory Made Ventures and director Robert Rodriguez of Spy Kids fame called El Rey; BabyFirst Americas, from Constantino “Said” Schwartz, a veteran of Spanish-language television; and one owned by NBA legend Magic Johnson. BabyFirst Americas is scheduled to launch in April and Revolt in 2013, with the other two due within the next two years.

To contact the reporter on this story: Jonathan Morris at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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