Netflix, Net Neutrality, Ultra Hi-Def, and Television’s Next Big (Wide) Thing

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Ultra Hi-Def replaces Super HD as the highest-definition picture on Netflix

In January this year, Netflix announced they’d produce all their original content series in 4K Ultra High Definition (UHD). On April 6, they confirmed they’d made the entirety of season two of their popular award-winning political drama, House of Cards, available in the cutting-edge format. In June, the streaming service plans to make Breaking Bad available in 4K. Other popular shows will follow.

Ultra Hi-Def (UHD) is the successor to High Definition, with the new format providing four times the resolution (3840 x 2160) of standard HD, along with an expanded color pallet.

But according to the Consumer Electronics Association, only 60,000 UHD televisions were sold in the U.S. in 2013. And while 2014 sales are expected to jump to 500,000, that’s a fraction of the 40 million TVs sold annually in the U.S. Netflix’ 45 million+ customers will account for an even smaller fraction of this year’s UHD TV owners.

So with most of its customers likely years away from owning a 4K television – assuming the format meets sales predictions – why is Netflix embracing the technology? Per Netflix Chief Product Officer Neil Hunt, 4K steaming is only a “passion project”. “The nice thing about streaming video,” says Hunt, “is that you can build 4K relatively inexpensively and deliver it to the 0.1% of customers that have the necessary TV.” The comment has a near-dismissive tone.

But others see a strategy. Consider the following three reasons offering 4K works for Netflix:

First: Netflix is positioning itself to appeal to early adopters and technophiles. Says Hunt, “We’re doing (4K streaming) partly for its brand value, to establish ourselves as leader in the space. The key…is to be at the forefront of delivering the best possible quality.”

Second: Sales of HD televisions are slowing. Electronics manufactures need 4K content to convince consumers to replace their current HD sets with pricey new UHD televisions. Distributing 4K content makes Netflix a valuable partner to manufacturers like Samsung, LG, and Vizio – each who’re now building and selling 4K televisions.

Third, and what looks to be a long-term strategy: Netflix hopes the high bandwidth requirements of UHD will encourage internet service providers (ISPs) like Comcast and Verizon to partner with them. It’s a seemingly contradictory stance, given the streaming provider’s recent payments to both ISPs – payments resulting from customers complaining of bandwidth loss when streaming Netflix. Netflix very publicly accused the ISPs of throttling Netflix’ bandwidth down until the company paid up – which they did.

While Netflix CEO Reed Hastings equated the ISP’s actions to extortion, urging the FCC to construct stronger net neutrality regulations to prevent further such instances of throttling, in the long run, the payouts may well be considered investments – with Netflix buying in as a partner to the ISPs.

Netflix is already the biggest single user of bandwidth, accounting for over one-third of total North American downstream usage during peak hours. So why adopt UHD, which gobbles up even more – by Netflix’ own admission, twice as much?

The answer to that may be with Netflix’ Open Connect CDN program, in which Netflix locates its own servers within ISP facilities. Doing so reduces upstream bandwidth ISPs need to deliver video. The ISPs don’t have to download from Netflix servers, thus saving both themselves and Netflix bandwidth, and allowing faster content delivery. Last year, Netflix expanded the former limited availability of Open Connect CDN to all ISPs as a way to promote its Super HD streaming – said to produce image resolution superior to that of Blu-ray. But the program has struggled with slow adoption. Despite incentives from Netflix, the ISPs have resisted. Not so tough to understand – after all, why would they enable a potential competitor?

But if UHD takes off, as customer demand grows, Netflix may be in a position to apply greater pressure to the ISPs. It’s a gamble. Given Netflix’ evolution, though — from a DVD-by-mail delivery service, to Standard-Def streaming, to available High Definition, to Super HD, and now UHD — it may also be considered simply the next step in the company’s evolution.

And that might explain Neil Hunt’s tone. Because he’s already looking past UHD.

Ever heard of Wide Field of View? Think of a 100″ diagonal UHD screen – but which you view from the same distance as you do a 42″ or 50″ screen. You don’t take in the whole screen at any one time; you look from one area of the screen to another, depending on what’s going on. It’s more like how we perceive the real world. Says Hunt, “The interesting angle will be in the center, but there will be added ambiance for the other two thirds around the edge.” It’s the home version of IMAX.

And if it comes to be, Neil Hunt wants Netflix to be the company who puts that big UHD Wide Field of View image on your living room TV – from a Netflix server sitting in an ISP office.