Netflix's Loss Is Really Netflix's Gain

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There's finally a settlement in the two-year battle between Netflix (NAS: NFLX) and the National Association for the Deaf.

Netflix -- which is currently providing captions for 82% of its online videos -- will be providing the transcriptions as an option on all of its videos by 2014 within 30 days of general availability.

This is naturally a major victory for deaf video buffs that can only enjoy some of Netflix's offerings. Even though Netflix will be the one burdened with the cost to provide the text option on its streams -- and shell out a small settlement now -- it's also a winner here.


For starters, it's now an ally instead of an enemy for the National Association for the Deaf.

The class action lawsuit was certainly controversial. Was Netflix violating the American with Disabilities Act by offering its video service without a complete range of captions? Will the organization now go after the device makers where Netflix streams still won't be available with visible captions?

Let's not go that path. The resolution is a win-win, but it may be a bigger victory for Netflix than you think.

It's not just about the spike in deaf subscribers that Netflix will attract as a result of the settlement. The real interesting nugget here is that Netflix just raised the bar in terms of what it takes to be a video service.

Amazon.com (NAS: AMZN) may be Netflix's closest competitor in terms of a premium streaming video service, but it has a long way to go make its catalog available with closed captioning. If you're Coinstar's (NAS: CSTR) Redbox, your plans to roll out a digital video service with Verizon (NYS: VZ) later this year just got a bit more complicated.

Transcribing streams isn't easy, and automated solutions are buggy.

Sure, a company can choose to ignore Netflix's settlement and collect the ire of the hearing impaired community. It would drum up bad press and an inferior product.

Some may be congratulating Netflix for doing the right thing, but from a tactical perspective it's also doing a brilliant thing.

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The article Netflix's Loss Is Really Netflix's Gain originally appeared on Fool.com.

Rick Aristotle Munarriz owns shares of Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Motley Fool newsletter services recommend Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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