Chief executive Reed Hastings revealed the decision to curb its ambitions to extend global reach following confirmation of its launch in the UK and Ireland in 2012. The company ended September with 23.8 million subscribers in the US, a drop of 800,000 from June following a price hike. Netflix had predicted that it would lose 600,000 subscribers, but this number was much worse.
“Well, we’re going to put a pause on our international expansion post the UK and Ireland till we get back to global profitability,” said Hastings on the company’s third quarter financial results conference call. “So that depends on how fast we can grow our global subscriber base, which will be some number of quarters. And we’re eager to get back to continuing the international expansion because we see it as such a large opportunity. But we need to take a few quarters to get our subscriber base back to the appropriate size.”
Netflix has already launched in Canada and Latin America and has 1.48 million subscribers across these regions, primarily in Canada. ”We are just beginning in this market with a lot to learn, and a lot we can improve over time, so it’s too early to tell whether we will reach the run-rate break-even within two years as we would like,” he said.
The company announced that it will launch in the UK and Ireland at the start of 2012 and Hastings said that it will face tough competition from pay TV broadcaster Sky and Amazon-owned Lovefilm. “We believe our service, at an aggressive price, will be compelling. We have to attract and retain subscribers efficiently enough to be able to generate a profit. While we normally target two years to profitability, with the increased competition in the UK relative to Canada, we anticipate it may take longer. We’ll know after our first few quarters,” he said.