Netflix had to make its potentially game-changing new deal to pay Comcast for improved service over its broadband lines because “there were some choke points around peak usage times,” the streaming service’s CFO David Wells said today at the Morgan Stanley Technology, Media and Telecom Conference. That should ease now that the agreement — which eliminates intermediaries handling Netflix traffic to Comcast — will “shore up the long-term subscriber experience.” Some investors are concerned that the arrangement might become costly. But Wells says not to worry: the additional outlays won’t change its forecast for fatter profit margins in its U.S. streaming business this year. The amount Netflix will pay Comcast “was incremental, but not to the point where we’re changing that.” Nor is he concerned that other broadband providers will now insist on large payments to improve Netflix transmissions. Others “could” ask for a similar deal, and the company is “somewhat caught in the middle” because it wants to ensure “a long-term subscriber experience” that will require more bandwidth as it offers more HD and, soon, 4K transmissions. Still, “not all ISPs are created equal,” Wells says, and “we’re not going to be interested in doing anything that will meaningfully change the economics.”
The CFO reaffirmed the company’s interest in offering different tiers of service for different prices. “We’re not in a hurry,” he says. Netflix wants to offer choices because “one size does not fit all from a price standpoint.” But current users’ plans likely will be grandfathered in. That’s “a lesson learned from 2011″ when Netflix infuritated customers by separating its streaming and DVD rental services, requiring those who still wanted both to pay a lot more.
On the programming front, Wells says that the number of original series will grow. “It would be great to get to one to two every month.”