Netflix gears up for “substantial European expansion”

Netflix is set to “embark on a substantial European expansion” later this year, as it looks to build on the 10.93 million international users it recorded at the end of the fourth quarter. 

In a conference call to discuss its Q4 2013 earnings, Netflix CEO Reed Hastings would not comment on rumours that Netflix is looking particularly at the German and French markets, but said Netflix was focused “on finding good markets that love content and that will steadily expand in Europe.”

Netflix’s success in the UK market, where there is strong competition from the likes of the BBC’s iPlayer and Sky, proves that Netflix “can still build a very successful business” in countries where there are existing rivals, claimed Hastings.

In a letter to shareholders to accompany Q4 results, Hastings and Netflix CFO David Wells said that the service was “making great progress internationally” and that member growth and contribution profit/loss was improving sequentially in all of its markets – except the Netherlands, which had its first full quarter of operations in Q4.

However, on the call Wells would not comment on whether Netflix was yet to break even in the UK, where it launched in January 2012, saying only that Canada, Netflix’s first launch country outside the US, took two years before it stopped making a loss.

Internationally, Netflix said it now has 10.93 million members, up from 6.12 million in Q4 2012, and expects this to grow to 12.53 million this quarter. This compares to 33.42 million US members in Q4 2013, which is tipped to grow to 35.67 million this quarter.

In its shareholders letter, Netflix said that it looking at introducing different price tiers after experimenting with multi-stream and SD/ HD options in the US market since last year. “Eventually, we hope to be able to offer new members a selection of three simple options to fit everyone’s taste,” said Hastings and Wells.

The firm also said it was looking to soon launch domestically on set-tops with small multi-video programming distributers, after successful rollouts with the likes of Virgin Media and Com Hem in Europe.

In terms of Netflix’s recent commitment to bring 4K content to the service, Hastings and Wells admitted that the short-term impact of this would mainly be on boosting “consumer perception of Netflix as a leader in internet TV” due to low uptake of 4K displays and lack of 4K content.

Overall, the firm reported revenues of US$1.18 billion (€866 million) in the quarter, up from US$945 million last year. Operating income was US$82 million, more than fourfold increase year-on-year.