The week ahead

Tom Hudson: Netflix may face a bumpy road

 

Special to The Miami Herald

For half the price of a movie ticket per month Netflix subscribers enjoy access to a library of films, documentaries, TV shows and, increasingly. Netflix’s own programs sent directly to their screens or mailboxes. Millions of households have been canceling their cable TV, turning off their televisions and logging on each night. Netflix's business model moved as fast as its subscribers’ Internet connections.

But the Internet equivalent to express toll lanes online could be created. A federal appeals court ruled last week the Federal Communications Commission does not have the authority to require Internet service providers to treat all websites equally. Comcast, AT&T, Verizon and other companies connecting Americans to the World Wide Web can charge different prices to connect to different websites at high speeds. Who they would charge remains unclear.

Netflix’s business relies on broadband connections. It’s unclear if or how streaming movies and programs online would be impacted if viewers had to pay more to get connected to watch them. But it should be a threat Netflix addresses Wednesday when it reports it’s fourth quarter financial results.

Netflix stock more than tripled in price in 2013 thanks to subscribers cutting cable cords and the company producing its own content (thus limiting expensive movie studio licensing fees). Viewers are fickle and impatient with their on-demand appetites but its the legacy DVD-by-mail business at Netflix that contributes more than half of the company’s earnings. What content by snail mail may lack in technological wizardry, it makes up for in profits.

Tom Hudson is a financial journalist. He hosts The Sunshine Economy on WLRN-FM in Miami, where he is the vice president of news. Follow him on Twitter @HudsonsView..

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