The recent announcement that Netflix will pay Comcast directly to stream content to Comcast customers just makes sense for both companies. Netflix pays the internet provider directly to ensure a level of quality that it’s not currently getting, and Comcast gets additional revenue for providing that level of quality. So what’s the big deal?
From what we can tell, there is nothing stopping Netflix from signing similar deals with other internet providers. In fact, now that Netflix has the deal with Comcast, it almost forces the other internet providers into making similar deals because Comcast customers will receive a better quality experience when watching Netflix. The only other alternative is that the content distribution companies must create a comparable level of service before they lose other customers.
If Netflix wasn’t getting the quality it needed from the content distribution companies, what choice did it have but to go directly to the internet provider? What’s the point of the middle-man if the middle man doesn’t add any value?
We don’t know the terms of the deal, so it is premature to worry about whether any costs will be passed down to the consumer. But what if they are? Those that are getting poor quality service would probably be happy to pay more for an improvement. Isn’t that what the free market is all about?
We tend to get scared when someone changes an established business model. But often that disruption ends up being beneficial to the customers because it increases competition. In this deal, hopefully removing the middle-man will actually lower the cost of content distribution because there is one less piece of the pie to dole out. At a minimum, we know streaming quality for Comcast customers should go up.
This deal provides a good framework for all companies on how to look at their own partnerships. Consider these questions:
- How often do you review the way you operate and look for ways to remove complexity and improve quality?
- Are you receiving additional value from your partnerships? If yes, how do you know that you are getting value?
- What would the impact be if you removed the middle-man from the distribution of your products, services or content and went directly to the consumer or one step closer to the consumer?
- What indirect or complementary organizations could you partner with to improve results for your customers?
Netflix removed the weakest link out of their distribution chain, which in most cases will lead to better performance and better results. What is the weakest link in your partnership model and how will you remove it?
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