So much for my crazy idea that the recent ruling against net neutrality would cause Netflix shares to fall. At this very moment, the stock is in the throes of one of the most vicious short squeezes I can recall — up $64, or about 20%, in after-hours trading. The ostensible reason for this entertaining effusion is that the company’s Q4 earnings came in a few pennies above high-end estimates. Also, they reportedly added 2.3 million streaming subscribers, a benefit that was offset somewhat by DVD customers who continued to desert the service in droves.
Despite the huge rally this evening, I remain convinced that the court ruling will pose a very serious threat to the profitability of Netflix’s streaming business, since it will allow ISPs to charge purveyors like Netflix according to the amount of bandwidth they use. Netflix is an inordinately large user, at times accounting for as much as 40% of all available digital pipe. We shouldn’t doubt that the company will someday have to pay its fair share, even if such concerns are evidently not on the tiny, diseased brains of the lunatics and arse bandits who have goosed the stock into the ionosphere this evening.