The vast majority of Netflix movies are now delivered as downloads over the Internet. According to its founder, chairman and CEO Reed Hastings, this is all by design (“Why else would I have called it Netflix back in 1997?”). Once free of the constraints posed by physical delivery of DVD’s, spikes in demand are radical, and driven by content availability, seasonality and the introduction of new media players and platforms. That’s why a move into the “elastic cloud” makes so much sense.

Romin Irini in Programmable Web attributes Netflix’s growth to “moving its API to the cloud.” He’s referring to the fact that Netflix, which was operating data centers with IBM server farms running Oracle software, has stopped all that and moved its distribution system onto Amazon Web Services’ Elastic Cloud2. The “Inside Baseball” banter attributes the move to a new “instance” on EC2 to support massive graphics processing. At the same time it contracted with IP-telephony specialist Level3 to serve as the primary distribution network for its movies.

The ripple effect has been dramatic. By some accounts, like this one by David Goldman in CNNMoney.com, self-service downloads of movies and video entertainment on Netflix regularly accounts for about one-fifth of the “download traffic” on the Internet. Media giant Comcast, which has morphed from a “cable TV” service provider into one of the largest providers of “triple play” (TV, Telephony and Internet) in the country, replied by imposing a fee on Level3 to compensate for a “traffic imbalance” in its normal “peering arrangement.”

Netflix subscribers who have Comcast as their ISP (like me), have not seen any change in their service, yet. The two peers are likely to sort things out and strike a deal (probably in secret) without any impact on quality. There’s a precedent for such a back-room dealings. In 2005, Level3 struck a deal with an IP-based carrier called Cogent Communications when the move to higher speed enterprise networks led to an “imbalance” in traffic among peers.

For movie viewers, Netflix is offering new pricing which gives them incentive to move to a download-only service. The new service is “unlimited” and is priced at $7.99 per month. When compared to the snail mail based plans – which range from a low of $9.99 and top out at over $40 based on the number of DVDs that a subscriber “rents” each month. With “clients” or media players that span smartphones, tablets, PCs and laptops, many of which can be hooked up to HDTV monitors for display, we’re witnessing the dawn of affordable, self-service RC-TV.

After the holiday buying season, we’ll take measure of the competition forming among Google, Apple, Amazon and TiVo for share of the video content delivery business.

Categories: Articles

Tags: Google, IP-based telephony, Recombinant Communications, Video, Netflix