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Netflix (NSDQ: NFLX) is hoping a new tech partner will help make its streaming more efficient to satisfy new bandwidth caps from internet service providers that come with potential financial penalties.
The movie and TV show streaming company is the first client of Palo Alto-based start-up eyeIO, a maker of a video encoding system it claims reduces the bandwidth needs of Netflix streams by more than 50 percent without sacrificing picture and sound quality.
The issue of bandwidth availability is one of Netflix’s most pressing concerns as it moves away from DVD rentals and seeks to expand its streaming service globally. In Canada, for example, large internet service providers including Rogers Communications have lowered the monthly usage caps to the tiered options they offer their subscribers. Some usage plans in the Great White North allow for as little as 2 gigabytes a month of usage, which will barely get you through Marley and Me. Other, more expensive plans allow up to 150 gigabytes a month, which is enough to watch about 10 movies in HD. In cases where subscribers can’t satisfy the usage caps, they either face extra fees or can even be kicked off the service.
In Latin America, where Netflix is looking to expand next, slower bandwidth speeds are an issue. And in the U.S., where the company is seeking to grow mobile usage, wireless providers are now capping data on their fixed networks. EyeIO co-founder Rodolfo Vargas, a former video program manager for Microsoft (NSDQ: MSFT), has extensive experience working with Latin American broadband infrastructure, a background that made him even more attractive as a partner to Netflix, he told paidContent.
Bandwidth caps, of course, affect more than just Netflix– they can impact any company with a streaming business that uses third-party networks to do that streaming.
“We are not in an exclusive relationship [with Netflix], and we have discussions under way in companies in similar fields. We expect to see a stream of releases in the coming months,”
eyeIO chairman Charles Steinberg told paidContent.
Current streams of 720p HD videos by Netflix consume roughly 3.8 megabits per second of bandwidth, but eyeIO says it can reduce that to 1.8 Mbps without the subscriber missing a thing. According to an eyeIO spokeswoman, Netflix began testing the technology has summer and has already begun to deploy it.
“EyeIO technology is an important part of the technology we use to improve video quality and overcome bandwidth challenges presented by internet infrastructure,” said Netflix product development VP Greg Peters in eyeIO’s Wednesday announcement.
EyeIO was founded in late 2010 by Vargas and Robert Hagerty, former chairman and CEO of teleconferencing technology company Polycom.