Sorta. It's that Netflix didn't want to pay more for something someone else was getting for cheaper. If I sell hot dogs for $3, but charge you $6 because you're you, wouldn't you raise objections?

The problem with your friend's reasoning about peering arrangements is that net neutrality is about getting what you paid for. If I go to the store and buy eggs and the farm decides it hasn't gotten enough money for the eggs, then the next time I go to the store to buy eggs, after I pay the store and get home, the farm sends someone to my house and demands an extra $3 from me (and only me). Something about that just seems off to me.