Future 4K streams of Netflix content will be...

Future 4K streams of Netflix content will be encoded at 15.6 Mbps, “well within reach of a significant minority of our members,” CEO Reed Hastings and Chief Financial Officer David Wells said Thursday in a quarterly letter to shareholders. “The reach of capable 20 Mbps broadband connections will continue to grow,” they said. However, “since the number of 4K displays sold in 2014 and the number of available hours of 4K content both will be relatively modest, the short-term impact of 4K is mainly on consumer perception of Netflix as a leader in Internet TV,” they said. Domestic U.S. growth at Netflix “is very strong,” and much of that can be credited “to the tailwind of Internet video growth in general,” they said. Hulu had three CEOs in 2013, “and yet grew paid subscribers an impressive 65 percent,” they said. “We think YouTube, Amazon Instant Video, iTunes video and BBC iPlayer are also growing fast.” And in the more “traditional” pay-TV sector, “there is lots of activity that may affect us on the margin,” they said. Within the pay-TV “ecosystem” looms some “potentially big shake ups,” including those that will be guided by the Supreme Court’s Aereo decision, they said. Depending on that decision, “Aereo will either have to pay for the broadcast content” like pay-TV operators, or pay-TV “will no longer be obliged to pay,” they said. “In contrast, we continue licensing and producing more exclusive content for our direct-to-consumer business, and are relatively unaffected by the big bundle questions.” Last April, Netflix introduced its four-concurrent-stream $11.99 a month option to begin its evaluation of “plan tiering,” the letter said. Since late 2013, it also has tested one- and three-stream “variants,” as well as SD/HD differentials “at various price points,” it said. “Eventually, we hope to be able to offer new members a selection of three simple options to fit everyone’s taste. If we do make pricing changes for new members, existing members would get generous grandfathering of their existing plans and prices, so there would be no material near-term revenue increase from moving to this potential broader set of options. We are in no rush to implement such new member plans and are still researching the best way to proceed.” Netflix finished 2013 with more than 44 million subscribers and expects to reach 48 million by the end of Q1 this year, the letter said.