Netflix will launch in another European market in the fourth quarter of this year, management confirmed as the streaming service reported its second quarter results. Earlier this year Informa Telecoms & Media forecast that Netflix would launch in Sweden before end-2012.
The company had put international expansion on hold to focus on returning to overall profitability. In its letter to shareholders, Netflix CEO Reed Hastings and chief financial officer David Wells said: “Given our return to global profitability this quarter and our continued success in the UK, we announced last quarter that we’ve decided to open an additional attractive European market in Q4 of this year. We will have more to say about this market later in Q3.”
On the conference call following the results, Hastings said that its international expansion would be focused on Europe. “For now, we’re focused on Europe because we’ve been extremely pleased with the UK launch and with the one million subs in the first 6.5 months. So we really are feeling quite good about our competitiveness in Europe,” he said.
Netflix claims that it has surpassed LoveFilm and now sees BSkyB as its main competitor in the UK. “We believe we have pulled ahead of LoveFilm in every important streaming-related metric,” Hastings said. “Going forward, competing effectively with Sky is our core and substantial challenge.”
Netflix added that it faces increased competition from Sky after the UK pay TV operator launched its Now TV OTT service, but noted its rival’s service costs more than double its own and that “our content libraries are mutually exclusive with no overlap of titles; as such, many households may subscribe to both services.”
At the end of the second quarter, Netflix had three million paying subscribers internationally, slightly below forecasts, and 22.7 million in the US. Revenue from international services was US$65 million (€54 million) compared with US$19 million a year earlier. The quarterly loss was US$89 million compared with US$9 million a year earlier. Total revenue was US$889 million and profit was US$6 million compared with US$789 million and US$68 million a year earlier.
Separately, Netflix management hinted at working with premium network HBO: “While we compete for content and viewing time with HBO, it is also possible we will find opportunities to work together – just as we do with other networks,” Netflix said.
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