Advanced warning: the first comment here linked to an article which clearly understood this better than me. I am still perplexed - but this post should be taken with a grain of salt.
Verizon took the FCC to court on net neutrality and won.
The big potential loser was Netflix. Under the old rules [the ones that the court overruled] tier one internet providers like Comcast or Verizon had to deliver Netflix packets the same way as they delivered any other packets (on landlines anyway) - and that meant that they could not selectively slow Netflix packets. If they were not allowed to selectively slow Netflix packets then they couldn't charge Netflix for the privilege of having their information delivered.
The argument for slowing them is that Netflix uses so much - and - so say Verizon and others - they should "pay their share". [Of course the counter argument is that when I buy my capacity I am paying for data to be delivered to me - and I have paid for all data, not all data except Netflix...]
Winning the court case had to be a positive for Verizon (that is why they took it to court). And it had to be a negative for Netflix (the most likely party to be charged). You wouldn't notice that in the stocks though - Netflix is up hard, Verizon not so much.
Comcast had more reason to dislike Netflix than Verizon though. After all Netflix competes with Comcast's core service (video delivery) and Reed Hastings of Netflix used to complain endlessly about Comcast's breach of net neutrality rules.
However Comcast - as part of its deal in purchasing NBC - agreed to follow net neutrality rules until at least January 2018 even if the FCC lost the net neutrality issue in court. After the FCC lost in court there was only one company that could not legally selectively slow Netflix content - there was thus only one party which Netflix did not have to deal with.
That party was Comcast.
And so it is really strange that the first deal Netflix did was with Comcast.
Netflix has just given Comcast a few million dollars - and seemingly for no reason.
Now Reed Hastings is a clever man - and he is not in the business of giving away millions of dollars.
So I presume he did it for a reason.
And I think it is this. The reason is to set a price. A low price. The lower the better - because after this they have the serious negotiation with Verizon. [And Verizon took the government to court and won - which leads you to think that Verizon is likely to be aggressive.]
Comcast knew they were not entitled to a brass razoo - and Netflix was giving them a few million dollars. From Comcast's perspective that was easy [take the gift]. The amount looks low. Comcast manages to look reasonable (and I don't normally put the words reasonable and Comcast in the same sentence).
And Netflix sets a low price.
It's a negotiating ploy.
But I don't believe it will work.
Lowell McAdam is unlikely to fall for it. He is not going to settle for single-digit millions. The tables have turned and the carriers are getting market power over Silicon Valley - and this is probably the quickest and easiest place to exert some power.
I think Reed Hasting wasted his few million.
Seeking different opinions as I have been wrong often.
No position in Comcast, Netflix. Long Verizon.
POSTSCRIPT: The first comment linked this article. VERY USEFUL AND PROVES I KNOW LESS THAN I THINK I DO ABOUT THESE ISSUES.
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