Netflix Predicts Consumer Demand for Net Neutrality

CEO Reed Hastings cites boom of Internet video companies.

Reed Hastings, CEO and founder of Netflix, talks during the launch of Netflix in Colombia on Sept. 9, 2011, in Bogota,Colombia.
By + More

Consumer demand for online programming is boosting subscriptions for Internet video companies, said Netflix CEO Reed Hastings, who predicted that demand for convenient access will prevent Internet service providers from charging higher rates for digital video services.

Netflix ended 2013 with 44 million subscribers, Hastings said Wednesday in a letter to shareholders. The company reported a subscriber growth rate during its fourth quarter that was higher than any quarter's rate in three years, with Netflix gaining 2.33 million subscribers in the U.S. and 1.74 million internationally.

[READ: Appeals Court Rules Against Net Neutrality]

Netflix projects this coming quarter it will gain 2.25 million subscribers in the U.S. and 1.6 million internationally. Hastings said Internet video technology is in a boom period that is benefiting Netflix's rivals as well, noting that online TV company Hulu had three CEOs in 2013 but "grew paid subscribers an impressive 65 percent."

Internet video has made programming incredibly convenient and created the phenomenon of "binge-watching" entire seasons of shows. Netflix is available for anybody with a broadband connection, but a federal court decision Jan. 14 opens the door for Internet service providers to operate like premium TV providers by offering priority traffic speeds to certain websites. Hastings predicted those Internet providers are wary of stifling consumer demand for convenient video.

"If ISPs, especially major ISPs, were to contemplate blocking Netflix or other services, it would significantly fuel the fire for more regulation, which is not something that they're interested in," Hastings said during a conference call on Wednesday. "In the long term we still need to figure out what it means and how that works out, but I think in the short term, it's very likely that there's no change."

 

Netflix plans to invest in more original programming. Its political thriller "House of Cards" premieres a 13-episode second season on Feb. 14.

"In 2014, we anticipate building on our tremendous momentum with new seasons of 'House of Cards,' 'Derek,' 'Hemlock Grove,' 'Orange Is the New Black,' 'Lilyhammer,' and a fully exclusive, final season of 'The Killing,'" Hastings said.

[ALSO: Congress Ready for Net Neutrality Standoff]

While proud of success in the U.S., Hastings said Netflix has "a big international opportunity."

"We plan later this year to embark on a substantial European expansion," he said.

Netflix is currently in 41 countries outside of the U.S., including seven European countries like Ireland, the United Kingdom, the Netherlands and Norway.

The challenge for Netflix overseas will be HBO, says Mike McGuire, an analyst at the information technology research company Gartner Inc. HBO has been testing a standalone purchase of its services in Norway that differs from the company's model in the U.S., where it comes as a premium channel on top of a bundled cable subscription, McGuire says.

More News: