Netflix Comcast Deal: The Costs We Bear

aNewDomain.net — Check out the latest study from the folks over at Generator Research on the Netflix Comcast deal. The firm just released this deep examination on the variety of costs associated with the Netflix and Comcast’s stream deal. The report — Over-the-Top Television, 2014 —  sheds light on the ISPs and how content providers work behind the scenes. It’s intriguing stuff.

Image Credit: Larry Press

Now, I’ve talked about ISPs and content providers like Netflix blaming each other over poor Internet performance before. And I believe the public desperately needs transparency around this Netflix Comcast deal. Network neutrality and the sky-high price of US Internet services, all for fairly measly speeds, each demand a critical look.

Generator Research just estimates the cost of the data that is trafficked online, but it provides a telling picture worth examining. Let’s dig in.

The cost of a preferred stream

Generator Research starts its premise by examining Netflix’s total revenue costs, which include content, delivery and other costs. The costs, reported in 2013, hit 1.89 milion dollars US. The report then takes a pool of average users for the year — that’s  29 million US subscribers in 2013 —  and makes the following assumptions:

• Content costs are 80 percent of the total cost.
• Delivery costs are 80 percent of what remains after content costs.
• 75 percent of those delivery costs are in the access network, while 25 percent are in the ISP network.
• Comcast makes $30 per subscriber per month. Fully $24 of that is due to delivering Netflix traffic.
• 80 percent of Comcast traffic is due to Netflix. Eighty percent.

Well, based on these assumptions, Generator Research says it takes $2 per subscriber per month to deliver Netflix content. Comcast pays $1.15 of that, while Netflix pays 86 cents. Assuming they proportionally split the cost based on respective monthly revenue  — $25 per month for Comcast, $7.99 for Netflix —  Generator then estimates that Netflix’s fee to comcast lands around $.28 per month per subscriber.

That is less than 5 percent of the cost of a subscription.

I immediately compare that number to my ISP’s ability to increase my rates by 5 to 10 percent every year, all because Internet service is a monopoly in the US.

Generator Research’s conclusion and cost analysis on the Netflix Comcast deal is based on a couple assumptions, which you can question. Sure. But without real data, this is a good initial foray into the cost of content delivery. And yes, we desperately need that data. Yesterday.

For aNewDomain.net, I’m Larry Press.

Based in Los Angeles, Larry Press is a founding senior editor covering tech here at aNewDomain.net. He’s also a professor of information systems at California State University at Dominguez Hills. Check his Google+ profile — he’s at +Larry Press — or email him at Larry@aNewDomain.net.