Last month, when almost no one had a firm understanding of how the court ruling on net neutrality would affect streaming video but nearly everyone with a tech blog had a hair-on-fire opinion on it, Netflix and cable/broadband giant Comcast reached an agreement to keep its shows running smooth and pixel-free. It’s likely that the future of television viewing itself was hammered out in that contract.
Under the agreement, Netflix agreed to pay Comcast for direct access to its broadband network. In the tradition of all things Netflix, the terms of the deal were not disclosed, but it will keep millions of screens glowing red with Netflix menus with few complaints about buffering. Considering that the late-Feburary agreement came just two weeks after Comcast announced its deal to buy Time-Warner Cable, it could affect as many as 33 million U.S. customers.
On the surface, it looks like the net neutrality deal forced Netflix to give up something to keep its customers happy and avoid any more reported instances of ISPs “throttling” their transmission speeds. But that’s a broad-brush analysis at best. Did the cable and broadband provider put Netflix over a barrel and force them to pay up under threat of throttling, or did Netflix negotiate a sweet deal and the cable guys avoided angry customers who, more and more, are turning to “Big Red” for their entertainment?
The answer is in the numbers. A few weeks ago, Netflix announced it added 4 million new subscribers in the fourth quarter of 2013, which brings its subscriber base to 44 million and counting. Any company that can boast that level of growth, not to mention $48 million in quarterly earnings, is not over any kind of barrel. It’s more than likely that Netflix set the terms, and as it goes to the table with other major providers such as Cox, AT&T and Verizon (the company that was Netflix’ chief agitator in the net neutrality battle), it carries massive leverage with it.
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