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Netflix’s 2020 financial reports for its Amsterdam-based Netflix International Holdings unit and three key U.K. subsidiaries show the streamer’s continued growth momentum outside the U.S., including expanding production activity in Britain.
Netflix International Holdings, which excludes results for the U.S. and Brazil, reported 2020 revenue of 12.5 billion euros ($14.5 billion), up 32 percent from 9.5 billion euros in 2019. Its operating profit jumped to 521 million euros ($605 million), 78 percent above the 292 million euros recorded in the prior year. When deducting income tax expenses of 96 million euros ($111 million), after-tax profit came to 276 million euros ($320 million), up 59 percent from 174 million euros.
For its worldwide operations, Netflix had earlier this year reported $25 billion in 2020 revenue, up 24 percent, with operating profit jumping 76 percent to $4.6 billion.
Britain is Netflix’s third-largest production hub behind the U.S. and Canada, and despite the coronavirus pandemic, production activity, for which the local operation is paid, expanded in the country last year, thanks to the likes of Bridgerton, which debuted in late 2020, and The Dig, which launched early this year. For 2021 and beyond, the company has targeted a further expansion of productions in Britain.
“Despite an incredibly tough year for the creative industry, the U.K. remains the most important producer of high-end film and TV in Europe,” a Netflix representative said. “We are committed to playing an active role in the industry’s full recovery.” And the rep added: “In the year ahead, we will continue to invest in production facilities and increase our content budget to include over 60 U.K. productions.”
Three core subsidiaries in Britain, on a combined basis, reached revenue of about 174 million pounds ($239 million), up more than 40 percent, with operating profit rising to 19.5 million pounds ($26.8 million) and after-tax profit to 16.5 million pounds ($22.7 million). U.K. subscriber revenue will be included here from 2021, with Netflix International currently accounting for that.
Netflix Studios U.K., which “provides production and content-related support services to Netflix,” reported revenue for the year ending Dec. 31, 2020 of 78.8 million pounds ($108.3 million), up 89 percent from the 41.8 million pounds recorded in 2019. That revenue for those services grew “due to increased activity during the year,” the company explained in a filing in Britain.
The business also increased its annual operating profit to 15.1 million pounds ($20.8 million), up from 5.4 million pounds in the previous year. And after-tax profit jumped to 5.8 million pounds ($8.0 million) from 2.8 million pounds.
Like other parts of Netflix, the unit also highlighted its focus on inclusion, saying in its filing: “We will find more stories and better improve our service if our employees come from different backgrounds, and we create an environment of inclusion.”
And it noted that after the end of 2020, it “entered into multiple studio lease agreements,” estimating the related “aggregate investment” at 362 million pounds ($498 million). The company has this year signed lease deals with Longcross Studios for production space and Segro Park Enfield for new soundstages.
A second British unit of the streamer, Netflix Productions U.K. reported that its 2020 revenue jumped 226 percent to 5.1 million pounds ($7.0 million) from less than 1.6 million pounds. The big gain was driven by the fact that the unit was only incorporated in March 2019 and therefore had “only minimal activity” in 2019, the firm explained. The unit’s operating profit increased to 475,002 pounds ($652,904), with its after-tax profit more than tripling to 357,735 pounds ($491,643).
A third British subsidiary, Netflix Services U.K., posted 2020 revenue of 90.1 million euros ($104.6 million), up 4 percent from 86.5 million euros reported in 2019. That figure is made up of revenue for services provided to Amsterdam-based Netflix International.
Operating profit rose to 13.6 million euros ($16.0 million) from 12.4 million euros in the previous year; after-tax profit rose to 10.3 million euros ($12.0 million) from 7.9 million euros.
Netflix Services U.K. also noted that as of early 2021, its corporate parent changed to Netflix Productions U.K. and that its results will now be reported in pounds. It said it will also now “recognize member revenue generated as the contracting party in the U.K.” rather than Netflix International, adding: “In line with this, we expect an increase in revenue.”
According to the Guardian, Netflix added about 2 million subscribers in Britain in 2020 to end the year with around 13 million.
The streamer’s number of employees in the U.K. hit 274 at the end of 2020, up from 29 in 2017.
Netflix’s U.K. and international tax payments also rose in 2020. Observers have, however, long debated the relatively low tax rates of technology giants in international markets. Addressing total 2020 U.K. corporation tax expenses of just around 4 million pounds ($5.5 million), a Netflix representative noted that the firm was “paying all taxes required.”
The streamer has also changed some of its structures and setups abroad, which will affect where revenue and taxes get accounted for as of 2021. “As Netflix continues to grow in the U.K. and in other countries, we want our corporate structure to reflect this footprint,” the streamer said late last year. “So from (2021), revenue generated in the U.K. will be recognized in the U.K., and we will pay corporate income tax accordingly.” That tax will be paid on profits.
Netflix International’s tax expense that amounted to 96 million euros in 2020 was up 4 percent from 92 million euros in 2019. The Netflix Services U.K. unit’s tax bill climbed 8 percent to 2.6 million euros ($3.0 million) in 2020 from 2.4 million euros, that of Netflix Studios U.K. rose 42 percent to nearly 1.5 million pounds ($2.1 million), and the streamer’s Productions U.K. unit paid 88,310 pounds ($121,370) in tax, up 207 percent from 28,766 pounds.
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