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Coronavirus Lockdown: Netflix, YouTube, and Amazon Prime Are Doing Something Silly and Smart In Europe

By Anders Bylund - Mar 21, 2020 at 1:10PM

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The largest video streaming services in the world bend over backwards to please European regulators, even if there's no real problem to address here.

Led by Alphabet's (GOOG 5.20%) (GOOGL 5.11%) YouTube, Amazon (AMZN 3.58%) Prime, and Netflix (NFLX 5.03%), video streaming services everywhere are limiting their video quality right now. They are conserving bandwidth in response to the coronavirus pandemic, mainly due to pressure from regulatory bodies. Millions of people around the world find themselves stuck at home with a growing thirst for digital entertainment, so why don't we turn down the video quality for a while?

Netflix, YouTube, and Amazon Prime are doing the right thing here, but maybe not for the reasons you expected.

What's going on?

It started with calls from the European Commission to cut down the bandwidth consumed by video streaming services. Thierry Breton, EU's commissioner for internal market and services, had a chat about this issue with Netflix CEO Reed Hastings earlier this week, suggesting that video streams should default to standard definition rather than high-def in this era of higher network traffic volumes.

Netflix was quick to accept this idea. Within a few hours, the company said that it would deploy a leaner video standard across Europe for the next 30 days, reducing the bandwidth consumed by a high-def video stream by roughly 25%. There may be visible differences in the resulting video quality, but most users aren't likely to notice.

With that, the floodgates sprung wide open.

YouTube has set its video streams to standard definition by default if you're watching from a European internet address. That's a more drastic step than simply reducing the bitrate of delivering a high-definition stream, as Netflix chose to do. Users can set things back to higher quality video streams, but experience shows that most people never touch their default settings in online services and software.

Today, Amazon Prime followed suit. Like Netflix, Prime decided to deliver lower-bitrate streams rather than reducing the image resolution, like YouTube is doing. This service may also roll out similar measures in other markets, while YouTube and Netflix have limited their bandwidth-saving measures to Europe for now.

When Walt Disney (DIS 3.69%) opens up its Disney+ service across several European countries next week, I wouldn't be surprised to see another round of lower-resolution streams or skinnier encoding bitrates.

A sky blue network cable plugged into a wall jack adorned with a decorative cloud-shaped wall plate.

Image source: Getty Images.

OK, so what's wrong with that?

Here's the thing. Video streams were never in danger of breaking the internet, and the lower-quality streams won't make much of a difference to service providers and long-haul connections.

All of these video services rely on so-called content delivery networks (CDN), either from third-party CDN experts such as Fastly (FSLY 4.35%) and Limelight Networks (LLNW 1.28%) or through their own in-house solutions. Either way, YouTube and Netflix don't send video streams to your house from their company headquarters -- or even from a handful of data centers strewn across the country. Instead, they have placed video streaming hardware in your service provider's network, as close to the final destination as possible.

Baby Shark never slowed down the internet backbone connections. Neither did Baby Yoda. At worst, these video streams might clog the last-mile delivery network between your service provider's local network center and your neighborhood. Even then, most ISPs run their networks with oodles of headroom, allowing for both temporary and sustained bandwidth spikes. Network professionals were quick to point all of this out to Breton, sharing traffic charts where coronavirus increases barely moved the needle:

And you're still OK with it?

So coronavirus lockdowns aren't likely to break the internet, but it's still good to see the largest video streaming networks making the effort. This state of affairs is a combination of politics and self-promotion.

It never hurts to make friends in high places, and the video platform companies are doing that by taking Mr. Breton's suggestions seriously. And the public will see that Amazon Prime and YouTube are taking pains to deliver solid entertainment services when we need them the most. It's all optics, really.

If the companies save a few pennies on network traffic services at the same time, that's just a bonus. Lessons can also be learned from how consumers react to lower-quality streams. All of these services run quiet little tests of details like that, all the time, but a large-scale experiment could prove valuable in the long run.

As a former systems and network administrator, I think this whole episode is a bit silly. But as an investor in all four of the companies mentioned above, I get that it's a useful tactic. Can't hurt, might help.

In the meantime, Netflix and friends get to look good from nearly every angle.

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Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$190.85 (5.03%) $9.14
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,359.50 (5.11%) $114.66
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$116.46 (3.58%) $4.02
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$97.78 (3.69%) $3.48
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,370.76 (5.20%) $117.07
Limelight Networks, Inc. Stock Quote
Limelight Networks, Inc.
LLNW
$2.38 (1.28%) $0.03
Fastly, Inc. Stock Quote
Fastly, Inc.
FSLY
$13.20 (4.35%) $0.55

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