According to three people with knowledge of the matter, Netflix Inc. has reached an agreement with Comcast Corp. to get a more direct access to the broadband network of the latter. This step aims to increase the speed of Netflixs services, as well improve their reliability.
Yesterday the two companies made and official statement, announcing a multi-year agreement. They, however, did not reveal any terms of the deal. One of the people familiar with the matter, who asked not to be named, because the terms of the agreement are not yet public, reported that Netflix agreed to pay Comcast millions of dollars on a yearly basis in order to get the opportunity to make its services more efficient, especially after facing customers complaints concerning the quality and speed.
Netflix is currently the largest subscription video-streaming service in the world. The deal with Comcast placed it alongside companies such as Facebook Inc. and Google Inc., which have already paid for content-delivery network access.
The founder of the research company MoffettNathanson LLC – Craig Moffett, said in an interview, which was cited by Bloomberg: “I would have thought Netflix would have held out with the Time Warner Cable deal looming. Netflix can ask for whatever it wants and has a reasonable shot at getting conditions put on the merger that could provide it with long-term benefit. On the other hand, that could be precisely what spurred this deal – that Comcast was willing to settle with Netflix for a relatively low price to make the Netflix problem go away ahead of the regulatory review.”
The deal between Comcast and Netflix is part of broadband providers strategy to collect millions in new fees. Michael Pachter, who is one of the analysts working for Wedbush Securities said in an interview, which was cited by Bloomberg: “The deal confirms that if you’re a video company that wants to get your stuff from point A to point B through a broadband pipe, you have to pay a tariff.”
Netflix Inc. fell by 0.63% on Friday to settle the session at $432.23 per share, marking a one-year change of +140.31%. According to CNN Money, the 26 analysts offering 12-month price forecasts for Netflix Inc. have a median target of $405.00, with a high estimate of $500.00 and a low estimate of $175.00. The median estimate represents a -6.30% decrease from the last close.
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