29 May 2013

Netflix Caching - Competition Breaks Out on a New Front

It is a well worn principle of management that if you want a problem to be addressed, start measuring it. When Netflix started its ISP rankings (see the current one here) it looks like they were following this advice. Once there was a measurement of which ISPs were doing the best job serving video to Netflix customers it would help define the goal (both for Netflix and for the ISPs).
An article today by Steve Donohue in Fierce Cable shows the business ramification of these rankings. Donohue notes that Netflix caching has emerged as a subscriber retention and acquisition tool, notably between Cablevision and Verizon FiOS in the New York metropolitan area. This is how it should be. Because cable operators are, by and large, not involved in acquiring content for their ISP customers, that certainly does not mean that content is unrelated to the reasons that a subscriber signs up for service or the experience that he or she enjoys. Video streaming -- in the forms of Netflix, YouTube, Hulu, and porn, not necessarily in that order -- are likely the biggest drivers for the sale of higher speed levels of Internet service by cable operators and telcos. To some extent, video streaming may be the only driver of the consumer's need for speed.

And the need for speed only increases as the technical quality of the content improves. There are already plans underway for 4K/Ultra HD episodes of Netflix's fine original series House of Cards.

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