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Netflix weighs in on net neutrality

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Netflix Inc. on Wednesday weighed in on a recent court ruling that opens the way for internet service providers to possibly demand fees from the Los Gatos-based company for streaming content to customers.

Two Netflix executives said as part of a letter to shareholders that it would "vigorously protest" and encourage its members to hold their ISPs accountable. The letter was written by CEO Reed Hastings and CFO David Wells.

"The most likely case, however, is that ISPs will avoid this consumer-unfriendly path of discrimination," the two Netflix executives wrote in the letter. "ISPs are generally aware of the broad public support for net neutrality and don't want to galvanize government action." 

But Michael Pachter, a managing director of equity research at Wedbush Securities, said if internet service providers were to start charging Netflix, it would "end up wiping out" its profits.

"Netflix’s profits aren’t that great because their content costs are high," Pachter said. 

The content costs are the licensing fees that Netflix pays entertainment companies to stream and deliver movies and TV shows to its subscribers.

The discussion on whether ISPs will charge Netflix a fee, comes at a time when Netflix is producing strong earnings. The company said on Wednesday its fourth quarter net income was $48.4 million. Sales increased 24 percent to nearly $1.2 billion in the fourth quarter.

Netflix stock closed at $333.73 a share on Wednesday, up $5.02.

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