May 21, 2014 / 4:06 AM / 5 years ago

Netflix to launch in six more European countries this year

LOS ANGELES/BRUSSELS (Reuters) - Netflix Inc (NFLX.O) will launch its online movie and TV subscription service in six more European countries including France and Germany this year, a test of its global expansion strategy as it faces a patchwork of local rules and competitors.

A Netflix App icon is shown on an iPad in Encinitas, California, April 19,2013. REUTERS/Mike Blake

The other new countries it will enter in late 2014 are Austria, Switzerland, Belgium and Luxembourg, the California-based company said on Wednesday. Details on programming and pricing in each country will be announced later.

Netflix, which already operates in Britain, Scandinavia and the Netherlands, will offer a mix of Hollywood movies and TV series in the new markets and plans to include its own original shows such as “House of Cards” where possible.

However, it does not have exclusive rights to all its own shows in all markets - House of Cards, for example, has been broadcast in Germany by ProsiebenSat1 (PSMGn.DE) and Sky Deutschland SKYDn.DE.

Netflix will compete with other video streaming services, such as Canal Play Infinity of Vivendi’s (VIV.PA) Canal Plus in France, as well as Inc’s (AMZN.O) Prime Instant Video and ProSiebenSat1’s Maxdome in Germany.

A possible merger of Britain’s largest pay-TV company BSkyB BSY.L with Sky Deutschland and Sky Italia, would add a further strong player on the European market with which Netflix would need to compete for rights and customers.

The success of Netflix in the Netherlands points to the challenges local operators could face in the new markets.

Since launching in the country in September 2013, the U.S. company has won about 500,000 customers, Kepler Cheuvreux analyst Matthijs van Leijenhorst estimates.

Dutch cable operator Ziggo said that it lost 16,000 digital pay-TV subscribers in the first quarter of this year because of increased competition from providers such as Netflix.

Netflix may be able to win over customers by offering low monthly fees in its new countries. In the Netherlands, a subscription costs 8.99 euros ($12.31) a month, while in Britain Netflix costs 5.99 pounds ($10.09).

In Belgium, for example, that compares with cable operator Telenet’s (TNET.BR) on-demand packages of between 14.95 and 24.95 euros per month and Belgacom’s BCOM.BR 14.95 euro movies and series pass.


However, local operators have not simply sat back waiting for Netflix to expand in Europe beyond its current operations.

In Germany, ProSiebenSat1 has cut the price of its Maxdome video-on-demand service by almost half over the past year which it said had pushed subscriptions up 120 percent in the first quarter, year-on-year. The service now costs 7.99 euros a month.

Belgium’s Telenet launched an unlimited video-on-demand service, dubbed “Rex and Rio”, late last year which offers many hit series such as HBO’s Game of Thrones for a monthly fee.

France, meanwhile, could also present problems for Netflix as it has a complex set of rules on when movies can be released in different formats. The rules prohibit a film from appearing on a monthly subscription video service until three years after its debut in theaters, though it can be rented through a set-top box four months after its premiere.

“The content they (Netflix) can offer differs from country to country and local or exclusive content that Telenet offers, for example, can be a barrier,” said van Leijenhorst.

“But that doesn’t mean they can’t be a threat in the long term. In the Netherlands, they have been very successful.”

Netflix currently has 48 million customers for its monthly subscription service in more than 40 countries, with 35.7 million of them in the United States, where it dominates the subscription video on-demand market.

Germany has the highest number of broadband households in Europe, with 29.1 million in 2013, according to estimates from SNL Kagan. France is third with 24.7 million, behind Russia.

The costs of launching in the new markets will keep the Netflix’s international unit at a loss, the firm said in a letter to shareholders in April. The company last month reported a quarterly loss of $35 million for the unit, less than half of what it was a year earlier.

Netflix gets about a quarter of its streaming revenue from international operations and expects them eventually to surpass those for the U.S. market. The U.S. streaming business reported a $201 million profit for the quarter to the end of March.

It launched in the UK and Ireland in January 2012 and in Norway, Denmark, Sweden and Finland in October of that year.

Reporting by Lisa Richwine in Los Angeles and Robert-Jan Bartunek in Brussels; Additional reporting by Georgina Prodhan in Vienna and Harro Ten Wolde in Frankfurt; Editing by Steve Orlofsky and Pravin Char

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