By Steve Rothwell
NEW YORK -- Netflix (NFLX) has reached a deal with Comcast (CMCSA) 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 that will also allow for future growth in Netflix traffic. The companies say the arrangement is already giving customers a better experience.
Netflix had 33 million U.S. streaming subscribers at the start of the year and accounts for about a third of all traffic 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 has been resisting paying fees to Internet companies, and this deal could open the door to similar deals 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 multiyear deal, the statement said.