Netflix CEO Reed Hastings offered an initial positive assessment of the proposed AT&T-Time Warner mega-merger that echoed his approval of Charter Communications’ successful acquisition of Time Warner Cable.
Hastings said that as long as the combined entity treated Netflix the same as it treated its own content, such as HBO’s online video service, he would be satisfied. “High order, as long as HBO’s bits and Netflix’s bits are treated the same, that would be the starting place,” he said on Monday evening at the Wall Street Journal DLive conference. “We really want to make sure that to the consumer, to the system, that basically it doesn’t give an unfair advantage to HBO over Netflix. If it’s open competition, we love that.”
Hastings also praised AT&T’s stated plan of using Time Warner’s assets, which include cable channels HBO and CNN, along with the Warner Brothers studio, to help create a new national video service to compete with cable TV providers. “I think AT&T is going to be very aggressive about building a national competitor to all of the cable companies,” he said. “If they pull that off, that would be in the consumer’s interest.”
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The comments were the first by the Netflix (NFLX) CEO since AT&T (T) announced on Saturday that it would spend $109 billion, including debt, to acquire Time Warner (TWX). In just a few days, the deal has faced a host of criticisms from analysts and investors, including arguments that AT&T overpaid, that the combination doesn’t make strategic sense, and that antitrust regulators won’t approve it.
As the CEO of the leading independent Internet video service, Hastings’ voice carries some weight in Washington. He opposed Comcast’s (CMCSA) attempt to buy Time Warner Cable because he feared the combined company would have a strong incentive to discriminate against Netflix. Regulators agreed and blocked the deal.
But Hastings supported Charter Communications’ (CHTR) subsequent move to buy Time Warner Cable because the company agreed to net neutrality principles prohibiting discrimination. Regulators approved that deal.
In a more science fiction moment of the interview, Hastings also said Netflix might eventually face unusual competition for customers’ attention that it could not overcome. “We’re pretty good at movies and TV shows, and so the competition that we worry about is substitution,” he explained, first referring to Snapchat and YouTube and Facebook. But then he added that the competition for people’s attention could be something that isn’t yet invented.
In the long run, “human entertainment will have moved on to something new,” Hastings said. “Is it pharmacological and pharmaceutical?”
“In 20 or 50 years, [the idea of] taking a personalized blue pill and you just hallucinate in an amazing and entertaining way and then a white pill brings you back to normality is perfectly viable,” he added.
If that happened, Netflix probably could not compete, since its expertise is in digital entertainment, Hastings said. “That’s a good chance to sell to AT&T,” he joked.
