What the Comcast-Netflix deal says – and doesn’t say – about the Internet ecosystem

[Commentary] The investment advisory press is having a field day with the recently announced Comcast-Netflix deal. The deal, as the companies hope to eventually present it to consumers, will permit Comcast customers to subscribe to Netflix much as they already do to such premium offerings as HBO, Showtime, and Starz. Simple. But some in the blogosphere want to portray this deal as not just business but as détente in a war.

Reduced to its most simple elements, this deal illuminates a common story in the Internet ecosystem — a story long told in the cable world — carriers (Comcast) and content providers (Netflix) are complementary industries and together provide a product that consumers find desirable. To be sure, the exact terms of the deal will depend on a wide mix of variables that influence each party’s bargaining power — relative market size, relative consumer demand, market substitutes and, yes, potential regulatory intervention and pressure. The deal is exciting not because it is good against evil, but because it promises a product consumers may enjoy. It’s the excitement of the free market system doing what it does best — innovating.

[Babette Boliek is an associate professor of law at Pepperdine University School of Law.]