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As Netflix Resists, Most Firms Just Try to Befriend Comcast

Reed Hastings, chief executive of Netflix, is known as a Silicon Valley maverick who enjoys tweaking his rivals.Credit...Robyn Beck/Agence France-Presse — Getty Images

In the middle of an otherwise routine earnings report last week, Netflix took an unexpected detour into the realm of antitrust enforcement: It opposed Comcast’s proposed purchase of Time Warner Cable, it said, because the deal would create a powerful giant with “anticompetitive leverage.”

The statement certainly grabbed the attention of the entertainment and communications industries. What it did not do was rally many others to the fight. Netflix stormed the hill, only to look back and find that almost no one was following it.

The $45 billion merger would transform Comcast into a vastly more powerful gatekeeper, giving it control of 40 percent of the country’s Internet service coverage and 19 of the country’s top 20 cable markets. As such, it could potentially disrupt the entire media and technology ecosystem.

Virtually every media and tech company — content providers like CBS and Disney, video streaming services like Amazon, Netflix and YouTube, and social media and e-commerce sites — has a major stake in the outcome of the government’s review of the merger. The question these companies now face is whether their interests are better served by speaking out about it, or by keeping any possible complaints to themselves as they try to negotiate the best deals they can with Comcast.

For the time being, almost none are publicly speaking out, partly because they are wary of antagonizing a company with which they do business.

Privately, though, media executives are eager to echo Netflix’s concern about the deal, and to cast themselves as victims of the potential megamerger. They use words like “omnivorous” and “rapacious” to describe Comcast, while expressing skepticism on the prospect of the largest cable company buying the second-largest.

“Every company, including ours, knows how we feel about the merger, but the question is, Are we going to do anything about it?” said one senior media executive, who like others, insisted on anonymity to discuss a sensitive business relationship. “Who’s going to be the first to kick sand in the bully’s face?”

That distinction already belongs to Netflix, and it drew a quick, sharp response from Comcast, which accused the company of disingenuously cloaking its business interests in pro-consumer rhetoric. Comcast said Netflix simply did not want to bear the costs of the enormous amount of Internet traffic that its subscribers generate. (During peak hours, Netflix streaming can account for nearly one-third of worldwide Internet traffic.)

Comcast has contended that the merger is not anticompetitive because the company has very little geographical overlap with Time Warner Cable. More to the point, Comcast says that the content providers are the players holding most of the power in their relationships. If consumers cannot watch their favorite shows and sporting events, they will just cut the cord. When Time Warner Cable blacked out CBS during a dispute over fees last year, the cable provider lost hundreds of thousands of subscribers. CBS received most of what it asked for in the contract negotiations.

“The balance of power in carriage negotiations has tilted pretty decisively to the programmers’ side,” said D’Arcy F. Rudnay, Comcast’s chief communications officer.

The proposed merger, though, could potentially upend this dynamic, in which programmers have traditionally had the upper hand, and as a result, put billions of dollars in play. Media companies are heavily dependent on the immense fees they receive from Comcast and other distributors. They worry that if Comcast gets bigger, it will have the ability to drive down those fees. And because Comcast is also in the business of creating content, through its ownership of NBCUniversal, competitors worry that the company will offer preferential treatment to its own networks.

Media executives say a supersize Comcast will essentially have veto power over any possible innovation. Even something as straightforward as trying to make content available on a new device would require Comcast’s approval.

The chief executive of Univision, Randy Falco, said this week that the deal was “truly a cause for concern.” But apart from it and Netflix, almost every other media and technology company has so far opted for strategic silence. Some analysts say these companies may be holding on to the threat of publicly criticizing the merger, while they try to negotiate new agreements with Comcast.

“You can bet that everyone and his brother is trying to strike a sweetheart deal with Comcast right now in exchange for either supporting or simply not opposing the deal,” said Craig Moffett, an independent media analyst.

Netflix’s antagonistic stance toward Comcast and the merger is partly a product of the company’s unusual corporate culture. Reed Hastings, its chief executive, is a Silicon Valley maverick who enjoys tweaking his rivals, both real and imagined.

Several months ago, he joked that the HBO Go password of his counterpart at the much larger HBO, Richard Plepler, was “Netflix” followed by an expletive. Soon after, Netflix produced a satirical video of Amazon’s delivery drone, the unnamed aerial vehicle that the company has said will one day deliver its products.

Netflix has now picked a fight not just with a competitor but also with a business partner, though it has done so with a considerable amount of leverage. Netflix is a popular brand with tens of millions of loyal subscribers, and it could count on a public outcry if its users were suddenly no longer able to stream “House of Cards.”

Netflix also has a different relationship with Comcast than traditional media companies like Disney, HBO and Viacom. Netflix needs Comcast’s broadband service to reach its customers, but as long as Netflix can afford to pay for it, its business model is safe. And Netflix has already arranged payment terms: The company waited to speak out against the merger until after it had reached a multiyear agreement with Comcast to secure faster and more reliable access to its subscribers.

The absence of corporate opposition is only thickening the air of inevitability surrounding the deal. Comcast was able to overcome considerable resistance to its 2011 purchase of NBCUniversal, which gave a cable operator control over a major broadcast network for the first time. The company is politically well connected, with more than 100 registered lobbyists in Washington alone, including a former commissioner of the Federal Communications Commission who joined the company shortly after voting to approve the NBCUniversal deal.

Still, the regulatory review could easily continue into next year. There is plenty of time for media companies to speak out — and some say they might, particularly if they are unable to get what they want from Comcast. The grievance process at the F.C.C. is public, but companies that do not want Comcast to know that they have registered opposition to the merger can do so anonymously through the Justice Department.

While he stopped short of opposing the merger, Mr. Falco of Univision did say that if it was approved, the combined company would serve 91 percent of the country’s Hispanic households. He also offered a stark, close-to-home example of the sway he said Comcast already held over its business.

Comcast, he said, is the only major cable distributor that does not carry Univision’s popular sports network. It does, however, carry the sports content of Telemundo, Univision’s main rival in the Spanish-language TV business — and a unit of Comcast’s NBCUniversal.

A correction was made on 
May 3, 2014

Because of an editing error, an article on Friday about Netflix’s resistance to the proposed merger of Comcast and Time Warner Cable described the sports coverage of the Spanish-language network Telemundo incorrectly. It is broadcast as part of Telemundo; it is not a separate sports network.

How we handle corrections

A version of this article appears in print on  , Section A, Page 1 of the New York edition with the headline: As Netflix Resists, Most Firms Just Try to Befriend Comcast. Order Reprints | Today’s Paper | Subscribe

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