NETFLIX AGREES TO PAY COMCAST FOR FASTER SPEED

Moving quickly after reports materialized last week that Netflix’s streaming service had slowed in some areas by as much as 27 percent due to online traffic congestion, Netflix announced over the weekend that it had agreed to pay Comcast an undisclosed amount of cash to gain direct access to Comcast’s broadband network. Comcast customers had been complaining for months about deteriorated picture quality and frequent spinning balls and other interruptions as the Netflix video buffered. The deal is regarded as a major breakthrough between an Internet service agency — Comcast is the largest broadband provider in the U.S. — and Netflix. It’s also hugely influential. Netflix is now expected to sign similar deals with other providers in the near future. Doing so represents a 180-degree turn from its previous position, namely that it was providing content without charge that benefited ISPs and that the ISPs should provide Netflix with free distribution in return. Why the change? On Sunday BTIG analyst Richard Greenfield observed, “We suspect Netflix realized Comcast represented far too large a percentage of Netflix’s overall subscriber base for Netflix to allow this problem to continue. How can Netflix hope to grow subs rapidly, if their subscribers who have the largest and most widely used ISP end up with a poor Netflix experience?”