has built itself into a dominant force in the content streaming
market, largely thanks to a wide library of shows and movies, as
well as some great original programming. This has made Netflix into
a powerhouse that is almost a must-have for consumers, a factor
that is certainly on the radar of major internet providers like
After all, Netflix shows and movies account for a huge percentage
of traffic, and the widespread availability of high-definition
video isn't helping matters either. Due to this, and how Netflix
interacts with service providers, quality issues for Netflix
services have been cropping up as of late.
This is because Netflix, not unlike many content providers, uses a
middleman service (in this case Cogent Communications) to connect
their network to various ISPs. These connections have been running
at capacity for some time and it is starting to hit quality now,
Netflix stream speeds having fallen by a third
on Comcast in the past few months.
Netflix decided to pay Comcast to deliver NFLX content directly to
Comcast instead of through a third party service. This should also
guarantee a certain level of quality to Netflix
, and may help to clear up quality issues for the streaming giant.
Though terms were not released, many seem to believe that the rates
Comcast will be charging look to be comparable to what Netflix was
paying when it was using a third party. Many are now looking for a
similar deal to be struck with
, as that company was also seeing a similar problem, so this
Comcast/Netflix deal could set a precedent for the space.
Is This Good for Netflix?
I believe that this is actually a good move by Netflix, and while
it remains to be seen if it will reduce costs, it will certainly
help to improve service and customer perception. Companies like
Netflix were already paying a third party in order to link up with
Comcast and other providers, so the deal is really just allowing
NFLX to cut out the middleman.
And more importantly, without this direct feed, it was very likely
that the quality of Netflix's content on Comcast would have stayed
poor. This would have impacted the customer experience and it may
have led some to drop their Netflix subscriptions entirely, cutting
into NFLX's user base.
Obviously, that is a situation that Netflix wants to avoid, and it
has to be one of the main reasons behind their deal with Comcast.
It also suggests that Netflix is finally realizing that they are an
enormous player in the content market, and that they can't really
get away with using third parties anymore. They have to connect
right at the source, especially if competition is expected to
increase in the streaming market from the likes of
At first glance, the NFLX deal with Comcast sounds terrible and
like an added cost for the streaming company. However, when you
realize that Netflix was already paying for this service, and that
now it has a direct line with Comcast, it becomes clearer that this
is just a shrewd move on the part of NFLX in order to make sure
their subscribers stay happy and can easily access their content.
The move may also be positive for Comcast, and eventually, other
service providers as well. With less worries about sluggish quality
users might watch more Netflix content and be more pleased with
their experience overall. And since Comcast is receiving a payment
for this data transfer now, it may help boost their bottom line
too, suggesting that this Netflix/Comcast deal may be a win-win for
the industry, and potentially investors as well.
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