Netflix is not a part of the Internet

[Commentary] The deal between Comcast and Netflix has been the subject of some thoughtful analysis of its potential implications for the broader Internet economy. But overall, the public discussion of the deal has generated more heat than light.

One source of confusion is the assumption that Netflix must somehow be an injured party here -- that it had “no recourse“ but to “capitulate” to Comcast’s demands because the ISP had it “over a barrel.” A source of confusion about the deal is a misunderstanding of the business Netflix is actually in. Netflix is not an “Internet” company. It’s business is not premised or contingent on the organization or underlying technology protocols of the Internet the way Facebook’s business is, or Google’s. Netflix is in the business of producing, licensing and distributing movie and TV content, full stop. It uses the Internet as one of its platforms for delivering that content (the US Postal Service is another), but moving bits around on the Internet is merely a necessary step to engaging in its main business of getting content in front of consumers. As for whether the arrangement with Comcast means Netflix will now get preferential treatment -- of course it does, but so what? In the content business, at least, big distributors always have preferential access to the market. That’s why indie record labels and movie studios sign with the majors for distribution. Access to the market is a function of scale and market size, and smaller distributors, by definition, don’t have those things, so they have a harder time getting their content in front of consumers. That may seem wrong, or unfair on some level. But it’s not a new phenomenon in the content business and it certainly didn’t start with the Netflix-Comcast deal.

[Sweeting is Principal Concurrent Media Strategies]