NEW YORK – Netflix has reached a deal with Comcast to ensure that its TV shows and movies are streamed smoothly to households, the first deal the online video streaming service has reached with an Internet service provider.
The two companies said in a joint statement Sunday they’re establishing a more direct connection to provide a better service to customers. The connection will also allow for future growth in Netflix traffic. The companies say the arrangement is already giving customers a better experience.
Netflix will now connect directly to Comcast’s broadband network in dozens of locations around the nation instead of streaming its movies and TV content through third-party Internet content-delivery companies, a tactic that some believe was expensive for Netflix and degraded its service.
Netflix had 33 million U.S. streaming subscribers at the start of the year and accounts for about a third of all traffic at peak times on the Internet, according to research firm Sandvine. As the video steaming company has grown, Internet service providers like Comcast have pushed the company for more structured deals to enable its content to be transmitted smoothly and reduce the strain on their networks.
While the companies did not disclose the terms of the deal, Netflix investors will want to know how much this deal will affect the company’s bottom line and whether the costs will be passed on customers. Netflix had resisted paying fees to Internet companies, and this deal could open the door to similar agreements with other providers.
Netflix is already experimenting with different rate plans that charge slightly more for households that want to stream its shows and movies on four different screens simultaneously.
The deal comes after months of collaboration with Comcast, though Netflix will receive no preferential network treatment under the multi-year deal, the statement said.
Comcast was ranked as the 14th fastest Internet service provider in January, according to a table on Netflix’s website. By connecting directly to Comcast’s broadband network, Netflix should be able to boost the quality and speed of its video streaming as it adds more customers and prepares to start streaming its content in the ultra high definition format this spring.
Netflix is reportedly negotiating with other Internet service providers, such as Verizon Communications and AT&T, over how to flawlessly deliver its content over the Internet.
Other large Internet companies such as Google already pay broadband providers a fee to enable more direct connections.
Comcast is the nation’s No. 1 pay TV and Internet provider under its XFINITY brand. The company said earlier this month that it had agreed to acquire Time Warner Cable for $42.5 billion in stock.
Critics have said the Comcast-Time Warner Cable merger, if approved by federal and state regulators, would consolidate Comcast’s power in the residential Internet market and threaten online companies such as Netflix. Comcast could interrupt or slow Netflix’s streaming of entertainment content to protect its legacy cable-TV business, critics have said.
Mark Cooper of the Consumer Federation of America said Comcast could be a “choke point” for online streaming companies.
The new Netflix arrangement is similar, Comcast officials said, to arrangements the huge telecommunications provider has with YouTube, Hulu and Amazon Prime.
The Associated Press and the Philadelphia Inquirer contributed to this report.