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As the dust settled on Netflix’s latest earnings disclosure — the streaming giant brought in 7.66 million subscribers during the fourth quarter of 2022 and now tops 230.75 million globally, it said Jan. 19 — one region stood out in the company’s closely watched filings. Europe, the Middle East and Africa (EMEA) quietly became the streamer’s biggest region in terms of subscribers, overtaking the combined user figure for the U.S. and Canada during the second half of 2022.
As of the end of the year, Netflix had about 2.4 million more subscribers in EMEA than North America after being roughly 310,000 behind it as of mid-year 2022. “Netflix is still above and beyond all other subscription video players in EMEA in terms of subscription figures, finishing 2022 with almost as many subscribers (76.7 million) as both Disney+ and Amazon combined (81 million),” notes Toby Holleran, research manager at research firm Ampere Analysis. “However, on a video subscription revenue perspective, Netflix’s $9.75 billion in revenue falls behind Comcast’s $11.3 billion revenue, with Netflix still standing as the second-largest group in EMEA in subscription video revenue terms.”
The COVID-19 pandemic — aka the stay-at-home streaming boom — saw a particular acceleration in subscriber gains in the region for the Ted Sarandos-run Netflix. “EMEA experienced enormous growth over COVID, up 50 percent over the past three years, fueled mostly by Western Europe in lockdown, but is back down to gentle growth now over the past year or so,” explains Enders Analysis analyst Tom Harrington. “Western Europe is at a similar point to where the U.S. was perhaps three years ago in terms of saturation — COVID clearly sped that process up.”
The EMEA region includes Spain, the No. 2 country in terms of the streamer’s sources of originals, with 123 hours produced in 2022, as well as the No. 5-ranked U.K. (92 hours), per an Enders Analysis estimate. The EMEA region also has more broadband households than in the U.S./Canada. “There are more than 300 million fixed-line broadband households in EMEA versus little more than 140 million in the U.S./Canada, which means a greater theoretical addressable market,” Holleran points out, noting that Netflix also is being bundled more into pay TV packages in EMEA than it is in the U.S./Canada. “In Europe, pay TV reach is much more stable,” compared with the precipitously declining landscape seen in the U.S.
But while Netflix’s EMEA business is now its biggest when looking at subscribers, in terms of revenue and average revenue per user (ARPU), North America still rules. “The main reason for the difference in ARPU is that Netflix is cheaper in EMEA than the U.S./Canada,” says Harrington. “In Europe, about 85 percent of EMEA subs, the standard tier is usually $1.50 to $2 cheaper. Outside of Europe, but still in EMEA, it is even cheaper.
So could Netflix reduce its amount of local original content in some foreign countries?
“It’s hard to see wholesale cuts in original content in markets that are still growing, but it appears likely that it would level out in terms of volume, much faster than in regions which produce content that has global relevance,” says Harrington. “If (content) quotas are in place, then it might be a matter of Netflix changing its attitude towards co-pros and licensing of local content to meet any quotas but also cut expenditure.”
This story first appeared in the Feb. 8 issue of The Hollywood Reporter magazine. Click here to subscribe.
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