The recent peering agreement between Netflix (Nasdaq: NFLX) and Comcast (Nasdaq: CMCSA) is expected to prompt other deals between content companies and broadband network operators.
Verizon (NYSE: VZ) CEO Lowell McAdam told CNBC on Monday that he and Netflix CEO Reed Hastings have had discussions that could lead to a similar deal. "We think it's in both of our interests," he said on the Comcast-owned network's "Squawkbox" program. AT&T (NYSE: T) is also in talks with Netflix, a spokesman told re/code.
Such deals could expand to include other content providers beyond Netflix, said Mark Fisher, vice president of marketing for Qwilt, in a FierceOnlineVideo interview. The agreement between Comcast and Netflix "is probably a good indication that two parties can get to rational deal and suggests others can do the same thing--not just other operators but also content providers," Fisher said.
The Wall Street Journal reported Sunday that Netflix and Comcast had reached the peering deal. It followed weeks of headlines regarding sub-standard Netflix service for some Comcast and Verizon broadband subscribers and came less than two weeks after Comcast agreed to buy Time Warner Cable (NYSE: TWC).
Terms of the deal weren't disclosed, but The New York Times pegged it as a multi-year agreement worth several million dollars a year. "Which is to say ... essentially nothing," MoffettNathanson Research analyst Craig Moffett wrote on the firm's blog. He wrote that it appears Netflix got the better deal. "Netflix gets cost certainty for a long time at a very low (negligible?) price and they get more capacity and therefore better service for customers," Moffett wrote.
Still, the deal appears to mark a reversal of Netflix's position that broadband providers should be paying it fees so their subscribers can access content, BTIG analyst Richard Greenfield wrote on the firm's blog. "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," he wrote. The deal could also set the table for Netflix's app to become integrated into Comcast's newest set-top boxes, Greenfield wrote.
For more:
- The Wall Street Journal had this report (sub. req.)
- The New York Times had this report
- Watch Lowell McAdam on CNBC
- re/code had this report
- see Rich Greenfield's post (reg. req.)
Commentary: Will online video stay on the sidelines of the Comcast-TWC merger review?
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