The most recent setback affecting Netflix, Inc. (NASDAQ: NFLX) came from the Federal Communications Commission. The FCC acted as many predicted they would when, on May 18, 2017, they decided to pare back net neutrality regulation that had been in place for decades. Net neutrality forces internet providers to treat access equally for all websites, regardless of the size of the company, the amount of traffic it generates, or the amount of bandwidth it uses. Opponents of the law argue that scaling back these requirements will allow providers to charge more money for faster service, pinning smaller companies against large companies like Netflix as they compete for limited bandwidth. This could be good news for the company, unless prices are not regulated, allowing for steep increases for rights to their broadband. Representing both the service’s popularity and the nature of video streaming, on an average weeknight in the U.S., Netflix accounts for roughly 45% of all web traffic.
In addition to this potential future expenditure, Netflix hit a snag abroad. The renowned Cannes Film Festival in France banned all films without theatrical releases from being screened in 2018. The rule change came after theatre owners expressed discontent with streaming cutting into their revenue, which is partially used to fund new films. Implementation of this new rule by the largest provider of public funding for films in Europe could result in other countries following suit in order to increase competitiveness for their homegrown productions. Especially given their desire to take back market share from the U.S., whose steadfast dominance has, at times, been a point of contention. About half of Netflix’s subscribers are abroad.
Regardless of these possible issues for the streaming giant, investors continue to believe in Netflix.