It seems that U.S. cable is now mirroring geopolitics and having its own superpower conflict.
The Netflix vs. cable cold war conflict started as threats of arming cord-cutters with the weapons of mass defection and escalated to bidding wars. Programmers had to choose between siding with the old-guard, traditional multichannel video programming distributors (MVPDs) alliance or the new over-the-top (OTT) content block.
For a while there was a thawing, but now we're back to conflict.
When Comcast and Netflix signed a network interconnection détente a few weeks ago, many thought that cold war was over. Maybe, just maybe, the competing models had found a way to work together. However, in the last few weeks, both sides have returned to their saber-rattling ways.
For its part, Comcast quickly followed up the Netflix interconnection agreement with word that it had licensed some aspects of Netflix's original programming directly from the studio producer. From the Netflix camp, came tweets that Comcast wasn't strong enough in its support of net neutrality and suggestions that Netflix shouldn't have had to sign an agreement like the previously-announced Comcast interconnect agreement.
What this all tells us is that although a particular campaign may have ended, the war is certainly not over. Both sides have far too much at stake and are far too suspect of each other's motives to become true corporate friends just yet.
Big cable always gets a cut of revenue from programming it delivers to customers. On the other hand, those that provide Web and Internet content feel they are providing a new and valuable service that drives high-speed Internet subscriptions and should be treated as such.
With this much revenue at stake and a whole new industry (OTT) being built, it would be truly surprising if the war ends anytime soon. Today, the major challenge seems to be that services like Netflix just aren't priced in a way that allow them to split their monthly revenue as distribution partners expect.
While premium pay-TV services have always assumed a significant revenue share with the distributor, most streaming providers have assumed their financial obligation ends with providing the stream from an origin server or CDN.
Some in the MVPD industry have already attempted to remind Netflix that when they delivered DVDs by mail, the cost of the postage was figured in. However, now that they stream movies over the Internet, concern has been voiced that they are essentially asking customers' neighbors to pay the equivalent of the postage.
One possible solution might be the creation (or in some cases the enlargement) of basic and premium streaming services. However, unlike Hulu where the premium level provides more content, in this case the premium service might provide more bits.
It might make sense that a basic level of service is available where "the open Internet" provides delivery. Then, those who want the highest level of service may be willing to pay for the full 1080p or 4KTV version.
This basic service might come with basic bit rates that can easily be handled by regular Internet interconnects and consumer connectivity (essentially a "best efforts" level of service). Premium services could come with a high price, high bit rates and a commitment from both programmer and delivery network to meet certain service levels. This would allow Netflix to continue to offer an inexpensive basic service and also pay the delivery agent (Comcast, etc.) for their support of a premium option.
All we know for sure is that we war isn't over, and although it may often feel like a clash of ideologies, it will likely (as with most business conflicts), come down to finances.
