Netflix Folds; Agrees To Pay Comcast To End Streaming Congestion

Tyler Durden's picture


There go the margins... For months, Netflix and Comcast have been 'negotiating' over whether the video streaming service should pay for the apparently excessive load it places on Comcast's network, but now, as the WSJ reports, Netflix has agreed to pay to stop the network provider slowing its stream and impacting customers. According to Netflix data published in January, the average speeds of Netflix's prime-time streams to Comcast subscribers had dropped 27% since October.

Percentage share of traffic on the web...


With Netflix accounting for almost 30% of web traffic at peak times, it is no surprise that Comcast's squeeze finally paid off. There are no details yet on the multi-year "mutually beneficial" deal but it is clear that broadband providers are gaining leverage over content providers.

Via WSJ,

Netflix Inc. has agreed to pay Comcast Corp. to ensure Netflix movies and TV shows stream smoothly to Comcast customers, a landmark agreement that could set a precedent for Netflix's dealings with other broadband providers, people familiar with the situation said.


In exchange for payment, Netflix will get direct access to Comcast's broadband network, the people said.




For months Netflix and Comcast have been in a standoff over Netflix's request that Comcast connect to Netflix's video distribution network free of charge. But Comcast wanted to be paid for connecting to Netflix's specialized servers due to the heavy load of traffic Netflix would send into the cable operator's network.




Netflix Chief Executive Reed Hastings decided to strike the deal after Netflix saw a deterioration in streaming speeds for Comcast subscribers. According to Netflix data published in January, the average speeds of Netflix's prime-time streams to Comcast subscribers had dropped 27% since October. Mr. Hastings didn't want streaming speeds to deteriorate further and become a bigger issue for customers, the people said.




The deal could force Netflix's hand in its standoff with other major U.S. broadband providers, including AT&T Inc., Verizon Communications Inc. and Time Warner Cable Inc.? all of whom have also refused to connect with Netflix's servers without compensation. Netflix's streams with Verizon in particular have gotten worse in recent months.


Netflix has little room to pay more to transmit its TV shows and movies. In a February regulatory filing, Netflix said that if providers don't interconnect with its servers, its ability to deliver streaming video, its business and operating results could be "adversely affected" due to increased costs.

The deal is the latest sign that broadband providers are gaining leverage in their dealings with content companies.

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Sun, 02/23/2014 - 13:49 | 4468030 HyBrasilian
HyBrasilian's picture

I thought JDS Uniphase was supposed to have prevented all this back in the 90's...

Sun, 02/23/2014 - 13:51 | 4468035 clooney_art
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This should have ended the other way around with customers leaving Comcast. That would have sent the right message.

Sun, 02/23/2014 - 13:53 | 4468041 HyBrasilian
HyBrasilian's picture

They all #FAILed to properly estimate the DEMAND for Miley Cyrus 'TWERKING' content...

Sun, 02/23/2014 - 14:10 | 4468081 JohnnyBriefcase
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Leave comcast for what? In many places it is the only option if you want internet.


Edit: Sorry Spastica Rex and feeb for cutting the comment line to say the same thing. Mine was a kneejerk post in regard to the assumption by many that everyone has a choice when it comes to ISPs and everyone who has comcast keeps them cause we want to.

Sun, 02/23/2014 - 14:39 | 4468157 max2205
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I see a drastic PE adjustment on Monday and a tweet from iacann that he dumped last week

Sun, 02/23/2014 - 16:27 | 4468511 James_Cole
James_Cole's picture

I see a drastic PE adjustment on Monday and a tweet from iacann that he dumped last week

Yes, on the one hand great to see NFLX take a dive. On the other.. wtf is this bullshit with comcast?? Don't understand how Americans are OK with that, that's like soviet levels of communism.

Sun, 02/23/2014 - 23:09 | 4469642 jcaz
jcaz's picture

Nah, they'll spin this into a positive for NFLX by market open on Monday, the stock will be up $30-  bad is good, remember?

Sun, 02/23/2014 - 13:59 | 4468061 Spastica Rex
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should have ended the other way around with customers leaving Comcast

For what - nothing?

Damn - maybe monopolies aren't appropriate as central drivers of our "capiptalist" economic system.

Sun, 02/23/2014 - 14:02 | 4468070 feeb
feeb's picture

Tough to leave CMCS in many locations where they are a monopoly provider. 

Sun, 02/23/2014 - 14:14 | 4468087 EscapeKey
EscapeKey's picture

They provide equipment, not the network. The network giants however took all their income and decided to pay out bonuses to insiders, instead of upgrading the network back in the 90es/20xx.
And now, the us has one of the worst broadband infrastructures in the western world. And idiots actually cheer on Netflix losing this struggle.
Christ, the media really has brainwashed the American public.

Cringely wrote a good piece on it back in 2007

Sun, 02/23/2014 - 20:18 | 4469139 NihilistZero
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Netflix isn't using Comcast's bandwidth, Com cast customers are using the bandwidth they fucking pay for!   This is why we should have non profit municipal broadband.  Fuck Comcast and their ilk. They add ZERO value and now they are taxing Netflix as a backdoor way of taxing their customers for using what they have paid for.  May all these corpratist cunts die a slow and painful death.

Sun, 02/23/2014 - 20:42 | 4469194 TBT or not TBT
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Comcast gave generously to the Jarret campaign, so things will tend to work out for them for another three years at least.

Mon, 02/24/2014 - 11:37 | 4470915 TheAntiBen
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NO, NO, NO!!!  The answer is not to ask the Government to run YET ANOTHER BUSINESS.  Seriously, when is this going to end!?!  Government should not be a business, they should simply oversee the businesses to provide a fair playing field!


Let's review some government business that are just doing AWESOME: 

Postal Service (massively in debt) - Check. 

Amtrak trains (massively in debt) - Check. 

Medicare/Medicaid (massively in debt) - Check. 

Social Security "Retirement Savings Bank" (massively in debt, and not retirement but this is how it's being used) - check

Federal Reserve Bank (purchasing all the debt) - check

Mon, 02/24/2014 - 15:47 | 4471992 NihilistZero
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Post Ofiice would be fine if not for stupid mandates.  And who said it has to be federally run?  Just provide all municipalties with a grant to build out fiber.  2 moths of QE would cover it and it wouldlower cost therby increasing consumer spending in other areas.  If they're gonna print regardless, I'd rather the funny money go to people than Verizon execs or bankers.

Sun, 02/23/2014 - 13:54 | 4468033 MsCreant
MsCreant's picture

Comcast: Who run barter town?!?!?

Comcast: Who run barter town?!?!?

[multiple sounds from famous movies are heard mumbling in the background]

Comcast: Embargo!!!

Sun, 02/23/2014 - 13:59 | 4468046 LawsofPhysics
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Correct.  I expect considerably more extortion to be forthcoming.  When fraud is the status quo. possession is always the law.  If you own a business, you better own 100% of the production capacity and supply chain to your customers.

The world is about to (re)learn what counterparty risk is really all about...

Sun, 02/23/2014 - 14:11 | 4468099 EscapeKey
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But of course. The lines have been drawn, soon the entire Internet will be sliced up and sold as "bundled packages" ie "get 50 media websites for a cheap introductory offer of $29.99/month.

Sun, 02/23/2014 - 14:18 | 4468113 XenoFrog
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It's going to be awesome. Want to visit that eurobased website? sorry you have to pay $9.99 for the International Upgrade.  Want to visit Zerohedge? Sorry but the FCC has determined it is dangerous domestic terror related and we've voluntarily blocked it.

This is the end of the Internet.

Sun, 02/23/2014 - 15:10 | 4468262 EscapeKey
EscapeKey's picture

No doubt zh goes in the "esoteric content" category here in the uk, which is voluntarily blocked by our glorious ISPs.

Sun, 02/23/2014 - 18:54 | 4468909 zerozulu
zerozulu's picture

and they hate us for our freedom...

Sun, 02/23/2014 - 20:28 | 4469161 malek
malek's picture

Exactly, plain and simple extortion.

In all these discussions around traffic generated by Netflix it surprises me no one asks the question how much Youtube (a/k/a Google) is paying for example to Comcast...

Sun, 02/23/2014 - 13:58 | 4468057 pragmatic hobo
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and of course the comcast customers who do not use netflix will continue to pay same monthly fee as those who do use it ...

Sun, 02/23/2014 - 13:59 | 4468058 buttmint
buttmint's picture

D'oh! Comcast financed and installed fiber-optic network...all that infrastructure and service trucks and pole climbing, trenching and Netflix and other content providers want to waltz in and skin the cream off the top? Hilarious.

Netflix reminds me of the SNL skit whereby the John Belushi was the house guest who would NOT LEAVE.

If Comcast had any brains, they would BUY Netflix. Ever visit the crappy and websites? They are an exercise in HOW NOT TO BUILD A WEBSITE. Comcast oughta be ashamed of the crap they post. It is all one big ad designed to funnel one to crap-ladened TV packages. In a very real way, Comcast created the conundrum that gave rise to NetFlix.

Netflix knows what people want. Comcast doesn't, yet owns the data pipe.

Sun, 02/23/2014 - 14:01 | 4468068 LawsofPhysics
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"yet owns the data pipe." - So you tell me, who's the real genius? See my post above.  Ownership has it's privileges...

Sun, 02/23/2014 - 18:55 | 4468912 pitz
pitz's picture

Same dynamic is going to play itself out with Amazon and FedEx, UPS, the USPS, etc.  After all, Amazon doesn't own the infrastructure of distribution.  They only own a few warehouses, at best, and have a ridiculously overpriced stock.

Sun, 02/23/2014 - 14:13 | 4468104 Maverick Ninefingers
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I've heard free market libertarians argue for privitization of roads, and that is exactly the situation we have here.  Comcast built the roads and they are exacting their toll.  Netflix is transporting their goods over the road with 18-wheelers and it's congesting traffic, so they have to pay up or their trucks will be delayed at the toll booth.

Sun, 02/23/2014 - 14:26 | 4468131 johnQpublic
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damn i hate driving around truckers

bunch inconsiderate bastards

and the lesson is............

Sun, 02/23/2014 - 20:46 | 4469199 DosZap
DosZap's picture

damn i hate driving around truckers

bunch inconsiderate bastards

and the lesson is............




Sun, 02/23/2014 - 15:34 | 4468330 Rock the Casbah
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The revenue side needs to be regulated by a Public Service Commission but there is no reason not to privitize the cost side.  If you don't, you get the DMV. 

Sun, 02/23/2014 - 16:21 | 4468492 ebworthen
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But Cumcast buying Time Warner Cable and gaining a monopoly for tax breaks and publicly funded networks isn't a problem?

Sun, 02/23/2014 - 16:11 | 4468457 XenoFrog
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Actually, taxpayers paid for a large chunk of the fiber-optic network.

Sun, 02/23/2014 - 17:53 | 4468755 pitz
pitz's picture

Nearly all of the cost in telecom is in building and maintaining the local networks, coax, twisted pair, or in very limited cases (ie: FiOS), optical fibre.  Not the long-haul fiber networks. 

Sun, 02/23/2014 - 19:51 | 4469068 XenoFrog
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Thankfully they were compensated for that effort with billions of dollars in tax breaks and hand outs from the Feds.

Sun, 02/23/2014 - 19:59 | 4469093 pitz
pitz's picture

Not really, except perhaps in certain rural situations where the difference between subsidy and no subsidy was service (or not).  Other than that, all of Comcast's network was built with the money contributed by, or borrowed by its shareholders. 

Sun, 02/23/2014 - 17:55 | 4468758 pitz
pitz's picture

Buy Netflix?  Pay top dollar for what effectively is a few FTP servers?  Are you kidding?  That won't help Comcast deliver more infrastructure to the consumer.  The underlying problem here is that Comcast simply isn't making enough money relative to the costs of upgrading the network to support unicast IP video on a widespread basis. 

Mon, 02/24/2014 - 07:35 | 4470194 Ace Ventura
Ace Ventura's picture

"The underlying problem here is that Comcast simply isn't making enough money relative to the costs of upgrading the network to support unicast IP video on a widespread basis."

Comcast isn't making enough money? Now THAT'S funny right there, I don't care WHO ya'are.

Sun, 02/23/2014 - 13:59 | 4468062 laomei
laomei's picture

And net neutrality ends not with a bang, but a whimper

Sun, 02/23/2014 - 14:10 | 4468098 Johnny Cocknballs
Johnny Cocknballs's picture

Grow the power of corporations and the FCC will.

Content soon will there target be.

That is, I'm willing to bet that dusty old Constitution will eventually "fail us" because our government will "ignore" it for the benefit of "corporations" and the power of the "state" to "censor."


In principle, it makes sense that a resource hog pay more.  The danger is both corporations and government will try tirelessly to control content.  Indeed, in a sense they already have in that Obama signed the "internet kill switch" thing and ther'es surely more that we don't know about and surely the amber alert tech allows them to disable phone networks...


p.s. Dara Kerr makes me think of blowjobs.


Sun, 02/23/2014 - 14:02 | 4468072 Wooden Tiger
Wooden Tiger's picture

At this house, we already pay Comcast extra money to get more bandwidth... Double, squeeze.

Sun, 02/23/2014 - 15:12 | 4468264 Stuck on Zero
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Is Netflix the user of bandwidth or is the consumer?  Netflix merely puts content up there for people to grab. 

Sun, 02/23/2014 - 17:52 | 4468750 pitz
pitz's picture

Netflix is one half of the use, just like the downloader is the other half.  The very nature of the Internet is such that uploads must equal downloads.

Mon, 02/24/2014 - 09:28 | 4470368 StandardDeviant
StandardDeviant's picture

Well, except for multicast, to be picky.  But that's not what Netflix is doing, so your point stands.

Mon, 02/24/2014 - 11:57 | 4471023 Parabox
Parabox's picture

Agreed.  People keep calling Netflix a resource hog, but that's not the way it works.  Netflix has a service.  Netflix is not forcing their service out through Comcast lines to thousands of homes.  Thousands of homes are using the Comcast service they paid for to request information from Netflix.  It would not be any different if there were 20 content providers like Netflix, the traffic would be the same.

It's like saying Frigidaire should pay the electric company a stipend when everyone has their air conditioners cranked in the summer.  Its backwards!

Sun, 02/23/2014 - 14:05 | 4468080 Maverick Ninefingers
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The graph only adds up to 85%.  I wonder what they left out.

Sun, 02/23/2014 - 14:15 | 4468106 Skateboarder
Skateboarder's picture

It starts with po and ends with rn.

Sun, 02/23/2014 - 14:16 | 4468107 Thorny Xi
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SPAM email

Sun, 02/23/2014 - 14:05 | 4468082 buttmint
buttmint's picture

..the 800lb gorilla in the room is Google Fiber Optic. Once that goes live as it is in the Kansas City testbed, then people will have a choice. Right now, it is Comcast, or head to your local cappucino shop for your email....

Sun, 02/23/2014 - 14:21 | 4468121 XenoFrog
XenoFrog's picture

Comcast and Verizon will just pay local politicians to create bans on any cable but theirs. The monopoly will stand.

Sun, 02/23/2014 - 17:50 | 4468748 pitz
pitz's picture

Google's a joke in that area.  Are you really serious? 

Sun, 02/23/2014 - 14:06 | 4468084 cocoablini
cocoablini's picture

And there goes net neutrality. The internet is dead.Long live the internet

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