Market Overview

Netflix Cuts Picture Quality To Ease Pressure On Internet Providers In Europe

Netflix Cuts Picture Quality To Ease Pressure On Internet Providers In Europe

Netflix Inc. (NASDAQ: NFLX) is reducing picture quality in Europe to reduce data consumption by a quarter.

What Happened

Netflix is taking action to ease the pressure on Europe's internet providers. The streaming service will lower bitrates, aiming to cut data consumption by 25%. Higher bitrates mean clearer and smoot her online videos, but also more data consumption.

A Netflix spokesperson said, “We estimate that this will reduce Netflix traffic on European networks by around 25% while also ensuring a good quality service for our members,” reported CNN.

European Commissioner, Thierry Breton, communicated with Netflix CEO Reed Hastings on Wednesday and Thursday regarding the burden video streaming was putting on telecom operators and networks. 

Commissioner Breton tweeted his appreciation, saying, “I welcome the very prompt action that Netflix has taken to preserve the smooth functioning of the Internet during the Covid-19 crisis while maintaining a good experience for users.”

Why It Matters

Streaming is a major contributor to internet traffic. Globally, video accounts for nearly 60% of downstream volume, according to Sandvine, a Californian networking equipment company. 

There are growing concerns that increased working from home and the use of streaming services by those spending more time indoors are putting a strain on internet infrastructure. 

In Italy, which has been hard hit by COVID-19, Telecom Italia SpA reported PC game traffic rose 90% in March compared with February, according to the New York Times.

Facebook Inc. (NASDAQ: FB) has acknowledged the impact of the pandemic on networks as well. In a conference call with the media on Wednesday, CEO Mark Zuckerberg said, “Right now, this isn't a massive outbreak in the majority of countries around the world yet.” He warned, “But if it gets there, then we really need to make sure we are on top of this from an infrastructure perspective, to make sure that things don't melt down."

Price Action

Netflix shares traded 0.60% higher at $334.01 in the after-hours session on Thursday. The shares had closed the regular session 5.25% higher at $332.03.


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