With its digital distribution of movies and TV shows, Netflix made it a media force in the United States. Despite the fact that the American company is doing very well in the U.S., Netflix decided to conquer the world, since few months ago, it announced that it is planning to expand its European offerings to six more countries, including France and Germany.
However, the company will face many challenges in expanding on Europe’s market. The fact is that many of the domestic pay-television companies already have the exclusive rights to some of the programming that Netflix’s service usually carries.
For example, in France, Netflix will not be able to offer subscribers its own very popular in-house production: the political drama series House of Cards. Canal Plus, the pay-television giant, already has the French rights to the series which is starring Kevin Spacey.
Since the growth in the United States almost stopped, Netflix obviously may have no other choice but to expand to Europe. The company already has a backing in Britain, the Netherlands and in Scandinavia. In those countries, the streaming media giant has a subscription service via cable or Internet broadband, charging the equivalent of about $10 a month for the service.
Among the new markets, which Netflix plans to enter by the end of the year, are also Austria, Switzerland, Belgium and Luxembourg. The company did not reveal how much it will charge subscribers in those countries. However, the analysts are claiming that the arrival of a new competitor could trigger price wars and that could be good news for consumers, regardless of the impact this may have on the companies.
Since Netflix arrived in Europe in 2011, this expansion will be the its biggest roll-out. The company has been battling the satellite giant Sky in Britain and Canal Plus, which already dominates the market in France. In Germany, Netflix will have to battle the Deutsche Telekom’s on-demand TV service, which is the powerhouse in that country. However, the fact is that there are also many smaller rivals in each one of these markets as well. Plus, there is also Amazon, which is rival of Netflix in America. Amazon is already offering on-demand broadband video services all across the U.S.
Netflix will not only have to battle the incumbents in 13 European countries, but will also need to arrange the rights deals for both American and local content in each of those markets.
The fact is that the competition for the best programming could be very fierce. Sky Deutschland, a satellite television operator in Germany already offers an on-demand video service. It has signed deals for some popular American series, including Game of Thrones. According to Bachelet, France could turn out to be even more challenging, since it already has pay-television providers that are offering a lot of content. Things in France are even more complicated, as the French laws require a delay in the online release of the movies until at least three years after they were shown in movie theaters. Besides that, Netflix may be forced to help paying for movie production in France, in order to comply with the national rules for distributors.
The European Union lawmakers have mutually agreed to protect so-called net neutrality, the principle on which the telecommunications companies and cable operators must treat all Internet traffic on their networks on an equal basis. That contrasts with the U.S., where the regulators are still planning changes, which might allow network operators to charge companies like Netflix extra to use their cable networks, because their video services soak up a lot of Internet capacity.
However, despite all of the challenges, the streaming media giant wishes to diversify outside its core market in the U.S, which, according to its latest financial statement, currently represents 72 percent of its 49.8 million global subscribers. Reed Hastings, Netflix’s chief executive, said that he wants to generate up to 80 percent of the company’s revenue from the international markets and that would most definitely be a big step up from today’s portion, which is at about 27 percent.
By: Janette Verdnik