For video streaming giant Netflix, Inc. (NASDAQ:NFLX), the first quarter has played out with all the intrigue of a House of Cardsepisode. And while it’s not yet clear how the year’s events will affect Netflix’s long-term business, what is clear is that investors like what they’re seeing.
After quadrupling in 2013, shares were up another 25% through February 27. What’s more, that figure comes despite a mid-January tumble in response to a crucial federal court decision that gutted the Federal Communications Commission’s (FCC) Open Internet policy, better known as “net neutrality.” That policy mandated that Internet service providers (ISPs) – including Verizon Communications Inc.(NYSE:VZ), which challenged the rule – treat all web traffic the same.
The court said that ISPs are free to favor their own content over that of providers such as Netflix if they wish, or require Netflix and other video companies to pay additional fees for bandwidth. That shaved 9.5% off Netflix shares from January 3 to January 21 before a strong earnings report sent the stock soaring to an all-time high.
Just a month later, Netflix and Comcast Corporation(NASDAQ:CMCSA) announced a deal that will increase Netflix streaming speed to Comcast customers. Comcast, despite being one of the largest ISPs, was among the slowest of broadband providers streaming Netflix content. Representatives from both companies said that discussions were underway well before the January court decision.
The agreement will see Netflix connect directly to Comcast’s pipes rather than route traffic through other companies. Although Netflix is paying Comcast for the direct connection, technically net neutrality is not violated since Comcast is not playing favorites in terms of the content reaching end users.
While opinions differ on how the deal might impact the industry, the