Netflix believes the European market will eventually produce greater earnings than the U.S. market.
While Netflix has become indispensable to some Americans, many Europeans haven’t had the chance to become addicted yet because they don’t have Netflix.
But they will soon.
Netflix has announced plans to expand into six new European countries later in 2014. Germany, Austria, Switzerland, France, Belgium and Luxembourg will get the streaming video service in the next few months, adding to the 40 countries where Netflix is currently available.
Netflix says it has 36 million subscribers in the United States and 13 million internationally, including 1.5 million in the United Kingdom, which first got the service in 2012.
European expansion for Netflix so far has been a loser financially. It reportedly lost $274 million on operations outside of the United States in 2013 and has lost $800 million since it first provided its service outside of the U.S. in 2010. The cost of international service includes providing technical and customer support across a wide range of languages and the company must also negotiate streaming rights for programming with each individual country.
The company estimated it spent $19.30 per user internationally in the first quarter of 2014 and spent $14.50 per user in the United States over the same period. Netflix CEO Reed Hastings recently stated that international customers will eventually generate 70 to 80 percent of Netflix’ revenue, as the company expands its work into providing content specifically for foreign audiences.
Netflix has not said how much the service will cost in the foreign markets. The company raised its video streaming service subscription cost by $1 in the United States in early May.
The company could face stiff competition in Germany, which has several other video-on-demand services. An analyst interviewed by the BBC reported concern that Netflix could win that battle.
"Germany potentially could be quite a difficult market as it has low pay-TV penetration and seemingly low willingness to pay," said Ian Maude of the media consultancy Enders Analysis. “One thing I'm curious to see in Germany is whether or not it has dubbed a lot of the shows for the market because - while French TV has a lot of subtitling - in Germany foreign language movies and TV shows are generally voiced over, and that can be quite an expensive process.
"However, Germany has the fourth largest population of broadband users in the world, making it an attractive market for services like Netflix.
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.