Netflix, Inc. (NFLX) Eying Pitfalls And Tripwires Of Western Europe

Netflix, Inc. (NFLX) Eying Pitfalls And Tripwires Of Western Europe
NFLX Photo by Matt Perreault

In order for Netflix, Inc. (NASDAQ:NFLX) to build on the growth that it has experienced both in its subscriber base and stock price over the last year and beyond, Netflix will have to focus on its international expansion.

While the company has enjoyed some success in Scandinavia, the United Kingdom and Holland, the company has hardly touched on Europe’s potential.

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Netflix necessary expansion

Netflix, Inc. (NASDAQ:NFLX)’s growth has been exceptional and in all its major markets it now dominates the flow of streaming video. Europe, however, is going to prove a considerably more difficult nut to crack due to licensing agreements, existing services, and (of course) the French.

According to a number of people close to the company, Netflix, Inc. (NASDAQ:NFLX) has already begun talking to American entertainment companies for licensing arrangements for Netflix in Germany. It’s also believed that Netflix has already spoken to the French government regarding offering its streaming as early as later this year.

Until Netflix enters the ring, media companies across Europe are cementing their existing positions.

While Netflix, Inc. (NASDAQ:NFLX)’s CEO Reed Hastings claimed he liked competition, he may not be singing the same tune given this consolidation going on in Europe right now.

“We can still build a very successful business,” he said on a video webcast to discuss results. “I think the key is having unique content, a great reputation, a good value proposition.”

Competition and rules

Just last month, German satellite operator SkyDeutschland began its own Netflix-like service, called Snap, and Italian broadcaster MediasetMS launched a similar service named Infinity.

Somewhat ironically, France’s Canal Plus claims it has the exclusive in-country rights for two years on the Netflix, Inc. (NASDAQ:NFLX) produced House of Cards that won Netflix an Emmy last year.

Western Europe had 134 million broadband homes at the end of last year compared to Netflix, Inc. (NASDAQ:NFLX)’s largest market the United States with 88 million.

This Western Europe market is expected to outpace the rest of the world in streaming growth in the next few years. But moves oversees cost money, Netflix’s international streaming unit lost $274 million last year, compared to a profit of $622 million for the U.S. streaming business.

And then there is France. Presently, companies like Netflix, Inc. (NASDAQ:NFLX) are restricted from streaming films for three years after their national theater releases. Additionally, in order to provide streaming services in France, Netflix will in all likelihood have to finance film production in France. Just Sunday French culture minister Aurelie Filippetti told French newspaper Journal du Dimanche that she would expect that Netflix would be held to the same standards and rules.

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