Advanced Television

Netflix CFO: Comcast deal was essential

March 4, 2014

Netflix had to make its new deal to pay Comcast for improved service over its broadband lines because “there were some choke points around peak usage times,” CFO David Wells told the Morgan Stanley Technology, Media and Telecom Conference. That should ease now that the agreement — which eliminates intermediaries handling Netflix traffic to Comcast — will “shore up the long-term subscriber experience.”

Some investors are concerned that the arrangement might become costly. But Wells says not: the additional outlays won’t change its forecast for higher profit margins in its US streaming business this year. The amount Netflix will pay Comcast “was incremental, but not to the point where we’re changing that.” Nor is Wells concerned that other broadband providers will now insist on large payments to improve Netflix transmissions. Others “could” ask for a similar deal, and the company is “somewhat caught in the middle” because it wants to ensure “a long-term subscriber experience” that will require more bandwidth as it offers more HD and, soon, 4K transmissions. Still, “not all ISPs are created equal,” Wells says, and “we’re not going to be interested in doing anything that will meaningfully change the economics.”

The CFO reaffirmed the company’s interest in offering different tiers of service for different prices. “We’re not in a hurry,” he says. Netflix wants to offer choices because “one size does not fit all from a price standpoint.”

On the programming front, Wells says that the number of original series will grow. “It would be great to get to one to two every month.”

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