Comcast, Netflix Reach Agreement on Streaming

The Wall Street Journal reports: “Netflix Inc. has agreed to pay Comcast Corp.  to ensure Netflix movies and television shows stream smoothly to Comcast customers, a landmark pact that could set a precedent for Netflix’s dealings with other broadband providers, people familiar with the matter said. In exchange for payment, Netflix will get direct access to Comcast’s broadband network.”

What’s this mean for you, the Netflix subscriber using Philly-based Comcast’s services? Well, it means that the problems you’ve had the last few months—movies that are slow to upload, then prone to freeze once they’re playing—probably won’t happen anymore. But there’s also a real chance that Netflix’s super-cheap $8-a-month service becomes somewhat less supercheap: The company will probably have to make similar payments to other Internet service providers, now, and somebody’s going to have to pay that bill.

And if slightly more expensive Netflix service means customers decide to stick with cable instead of joining the legions of cord-cutters? Well, that’s probably OK with Comcast, too. As of today: It gets paid either way.

Bloomberg reports the deal was a “surprise”:

The agreement is a surprise because Netflix could have used the issue as leverage while Comcast attempts to acquire Time Warner Cable Inc., an industry researcher said.

“I would have thought Netflix would have held out with the Time Warner Cable deal looming,” Craig Moffett, founder of research firm MoffettNathanson LLC, said in an interview. “Netflix can ask for whatever it wants and has a reasonable shot at getting conditions put on the merger that could provide it with long-term benefit. On the other hand, that could be precisely what spurred this deal — that Comcast was willing to settle with Netflix for a relatively low price to make the Netflix problem go away ahead of the regulatory review.”

The New York Times warns there could be ramifications for startups:

Tim Wu, a Columbia Law School professor and advocate for net neutrality, said the interconnection agreement between Comcast and Netflix was one of the first such arrangements where a broadband provider like Comcast has extracted payment to send specific content through the “on ramp” to its network.

“This is the water in the basement for the Internet industry,” Mr. Wu said, the first in what could be a flood of such arrangements. “I think it is going to be bad for consumers,” he added, because such costs are often passed through to the customer.

One fear is that if such deals become common, only the wealthiest content companies will be able to afford to pay for them, which could stifle the next Netflix from ever getting off the ground.