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All that Hastings would confirm, speaking on a conference call accompanying the company’s latest results, is that Netflix was planning “a substantial European expansion” in 2014.
Netflix executives reportedly met with French and German government officials late last year to discuss a launch in the respective territories and local content suppliers have confirmed that Netflix is negotiating regional rights deals ahead of a major European push.
After establishing an EU footprint in the U.K. and Ireland, the Nordic territories and, most recently, the Netherlands, 2014 could be the year that Netflix truly goes big in Europe. With Germany and France added to the U.K., the group would have a presence in Europe’s three largest TV territories. There are still some regulatory and legal wrinkles to smooth out. Europe’s laws regarding film distribution could complicate Netflix’s roll-out, particularly in France where strict windowing laws prevent feature films from being offered on an subscription VOD service until three years after their theatrical release.
“(Netflix) plans a substantial European expansion later this year, we assume into Germany and possibly France,” wrote Alan Gould, an analyst with Evercore in a report to investors Thursday. Gould notes that Netflix’s Dutch launch late last year could have been a “warm-up for Germany” since customer behavior is similar in the two neighboring territories, with direct debit accounts much more common than credit card use. “We note that Germany has lots of free over-the-air stations and France has a lot of potential regulation,” Gould writes.
In each new European territory, Netflix also faces the challenge of building a subscriber base from scratch, often against established competition from the likes of Amazon-backed Lovefilm or VOD services from local broadcasters and cable companies.
But on the conference call, Hastings said Netflix’s success in the U.K. showed that the company can still build “a very successful business even where there are strong local players “like the BBC iPlayer, Lovefilm and (pay-TV group) Sky.” Hastings, however, declined to comment on whether its U.K., or any international operation, had yet reached profitability.
Around a quarter of Netflix’s 44 million subscribers are based outside the U.S. in one of the 41 territories where the service is currently available. The company’s international unit added a further 1.74 million customers in the fourth quarter, making for a total of 9.72 million international users. The unit’s “contribution loss”—a measure of operating loss—shrank to $57 million in the fourth quarter from $74 million.
“Our success this year in increasing international net additions to nearly the level of our domestic net additions shows substantial momentum and confirms our belief there is a big international opportunity for Netflix,” Hastings said.
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