Netflix subscriptions are still surging, despite concerns about net neutrality, increased competition, and market saturation.
According to the company’s fourth quarter 2013 earnings call, Netflix topped over 33.4 million domestic and 10.9 million international subscribers by the end of 2013. The company’s global subscriber base increased by over 11 million from the previous year, the largest year-over-year net increase in the company’s history.
CEO Reed Hastings brushed off concerns that the U.S. Court of Appeals ruling curtailing the FEC’s ability to impose network neutrality regulations would have a significant impact on Netflix going forward. Hastings reasons that few Internet service providers will risk upsetting such a large segment of their customers with reduced speeds or restrictive pricing tiers, citing Netflix’s 31.6% share of downstream Internet traffic during peak hours.
Hastings also downplayed suggestions that the upcoming Sochi Olympics would have a negative impact on subscriptions in the first quarter of 2014. While some eyes may shift to the Winter Games, Hastings said the impact would be, at worst, mild and would likely be offset by increased subscriptions driven by the release of the House of Cards second season.
Netflix will also continue to experiment with its subscription model, with a plan to introduce tiered pricing options. The company is currently testing pricing plans based on the number of simultaneous streams on a single account, creating an option to have more than one user on each account. A pricing plan based on video quality is also in the works, allowing users to pick between standard and high definition. Hastings gave no word on if or when these plans will roll out, but he did note that if the new pricing options are introduced, existing users will be grandfathered in to their current plans.
Any changes to the company’s pricing model must be introduced cautiously and only after extensive testing. In the past, users have responded negatively to pricing changes. The company’s ill-fated September 2011 decision to decouple its DVD and streaming services while also raising prices outraged many of its users. The move led to a decline of 800,000 subscriptions. By allowing existing customers to keep their current plans, the company hopes to prevent a similar backlash.
Looking forward, Netflix’s expansion into international markets provides additional room for growth for the company. The service is already available in markets including Canada, the United Kingdom, and Ireland, and the number of international subscribers increased by over 4.8 million in 2013. The company is forecasting that international subscriptions will exceed 12.5 million by the end of the first quarter of 2014.
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