By now it’s common knowledge that Netflix, Inc. (NASDAQ:NFLX) will expand into new European markets this year, though CEO Reed Hastings hasn’t yet specified which ones. The video streaming has 31.7 million subscribers in the US, so there is still room for growth in its home market, but it will need to repeat the successes that it has had in Canada and the UK if it is going to satisfy bullish investors.
“These next destinations for Netflix, Inc. (NASDAQ:NFLX) will differ from its first wave of European markets — the U.K., the Netherlands and Scandinavia — in one key regard: Incumbent pay-TV providers and pure-play streaming services from Russia to Spain have been anticipating the entry of the U.S. juggernaut,” writes Andrew Wallenstein, editor-in-chief: digital at Variety.
Netflix needs to adapt to local tastes
While few local video-on-demand (VOD) services can compete with Netflix, Inc. (NASDAQ:NFLX) in raw number of titles available, they could have an initial advantage understanding what local viewers want to watch. Netflix has spent enormous time and energy trying to understand American tastes. Translating those efforts into other English speaking markets has gone well, but figuring out changing preferences in the Czech Republic, for example, may require Netflix to do more work from scratch.
Licensing issues will become more complex
Even just focusing on major titles can be problematic because Netflix, Inc. (NASDAQ:NFLX) will need to acquire licenses for each market that it enters. Sometimes it will be able to buy global or international rights, but sometimes it won’t, and keeping track of the patchwork of licensing will only be more complex as the company expands. Of course Netflix will have its growing stable of original content to help it push into each market, but it can’t expect re-releasing House of Cards in a new market to give the same pop in subscribers simply because many will have pirated the show by the time Netflix sets up shop.
Netflix, Inc. (NASDAQ:NFLX) has plans to raise $400 million to help fund the expansion, but it has also warned investors that it won’t add new markets at the same rate that it has over the last few years. We should find out where Netflix is headed next before long, but most people think Germany must be high on the list. It’s a relatively wealthy country with good broadband infrastructure (some parts of southern and eastern Europe would have trouble supporting the amount of traffic that Netflix brings with it).