Does Comcast actually owe Netflix a share of broadband Internet subscription fees? Before dismissing the question out of hand, take a second to consider; in May it was reported that Netflix accounts for 25 percent of all North American Internet traffic. That’s a whopping number, and one that puts pirating of copyrighted material to shame, as a percentage of overall Internet usage.
So do ISPs then owe some of there growth to Neflix? At the All Things D Conference, Netflix CEO Reed Hastings had this to say:
We haven’t yet said [to broadband providers], ‘Of your $40 [per month] broadband [service], we are 30% of the traffic, so we want 30% of the revenue,’” he said, according to a transcript by BTIG LLC. “We haven’t done that, [so] there is still a good relationship.”
That’s one side of the argument, and one that would likely resonate with the movie-streaming public. However, those in the know say that Hastings in bluffing, in the face of tighter restrictions on bandwidth, with net neutrality facing an uncertain future.
Michael Patcher, and analyst with Wedbush Securities had this to say:
“The Netflix service adds a layer of cost to broadband service, and it is inconceivable that a significant number of Netflix users sign up for broadband solely to access Netflix. That’s like Angry Birds creator Rovio asking Apple [Inc.] for a portion of iPhone revenues and asking AT&T [Inc.] for a portion of data-plan revenues … simply a silly concept.”
If Angry Birds comprised 30 percent of traffic to the iTunes App Store, this line of argument might carry more weight. After all, Netflix put together the business model and content partnerships that drive the traffic over ISPs networks. Angry Birds, as an app, is one of more than 500,000—albeit a riotously popular one.