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By many accounts, Netflix is doing better than ever. The company may be famously secretive with its data, but the numbers on its quarterly earnings report speak volumes. (Even people of means like Frank and Claire Underwood would be jealous of these earnings.) Its revenue is soaring, its stock is surging, and its subscriber base is exploding.
But some worry that Netflix is approaching had times, due to the U.S. Court of Appeals striking down portions the FCC Open Internet Rules. This decision could allow broadband providers to charge Netflix—and other bandwidth heavy sites—more. Making up almost one third of internet streaming traffic in North America, Netflix could be hit hard by the news.
So what should a potential investor pay attention to: Netflix’s quarterly earnings, or predictions of doom? Take a look at the pros and cons.
The Pros
- Netflix gained over 2.3 million subscribers in America in 2013.
- At the end of 2013, Netflix had mover than 44 million subscribers worldwide.
- After its earnings report came out, the price of Netflix stock rose over 17% to $391.61 per share.
- In the first three months of 2014, Netflix anticipates getting an additional 2.25 million U.S. members.
- Netflix’s full year net income in 2013 amounted to $112.4 million.
- Throughout 2014, Netflix plans to expand its European base.
The Cons
Despite its amazing success, some worry that Neflix will face some stunting legal challenges in the near future, thanks to Verizon’s legal successes. The U.S. Court of Appeals ruled that the FCC didn’t have the right to impost non-blocking or non-discrimination rules on internet providers.
Without net neutrality protection, internet providers could hike up costs of high bandwidth traffic. That could be devastating for video streaming sites like Netflix, YouTube, and Hulu.
CEO, Reed Hastings issued a letter to Netflix stakeholders after Verizon successfully challenged the FCC rules of net neutrality. He called the recent events a “draconian scenario.” His letter, however, rang of hopefulness. Hastings questioned the likelihood that internet service providers would take advantage of the situation, since most people purchase high bandwidth packages specifically for quality video streaming. “ISPs appear to recognize this and many of them are working closely with us and other streaming video services to enable the ISPs subscribers to more consistently get the high-quality streaming video consumers desire,” Hastings reasoned.
If things turn out differently though, Netflix could pay between $144 million and $936 million in fees per year, according to some estimates.
