Bojack

Netflix turns its eye to international expansion

Streaming video company will also continue its aggressive pursuit of original content

Although the U.S. accounts for nearly three quarters (71.2%) of Netflix’s subscriber base, “broad success” in foreign markets is leading the streaming video service to aggressively expand its international footprint.

Reporting its second quarter results this week, Netflix said it currently has more than 50 million subscribers in 40 markets around the world, with plans to launch six more markets (Germany, France, Austria, Switzerland, Belgium and Luxembourg) in September.

Those six countries have more than 60 million broadband households combined, expanding Netflix’s international addressable market to more than 180 million broadband households, twice that of the U.S.

Netflix added more than 1.1 million international subscribers in the second quarter, a 78% increase over the corresponding year-earlier period. It now boasts 13.8 million international subscribers.

Speaking with analysts during a conference call to discuss second quarter results Monday, CEO Reed Hastings said the company has seen “tremendous adoption” of on-demand viewing.

He said that an expected drop-off in demand stemming from the World Cup never materialized, as the company maintained a “straight line” of net additions. “We really see this as an enormous moment in history, as on-demand internet services are coming to the fore around the world,” Hastings told analysts.

Hastings said that a recent $1 a month price hike for new subscribers has had a “pretty nominal” impact on new subscriptions and customer retention.

Overall, Netflix reported second quarter net income of $71 million (U.S.) on revenues of $1.34 billion. The company’s international operations lost $15 million in the quarter, down from $66 million in the year-earlier period.

In a letter to shareholders, Hastings said the company’s Canadian marketing campaign, “You’ve got to get it, to get it” – which recently introduced a series of new executions – continues to resonate with consumers.

DDB Vancouver’s “Pep Talk” ad was a recent winner in the Film Craft Lions category at Cannes.

Netflix is aggressively pursuing an original content strategy, with upcoming series including its first foray into adult animation with BoJack Horseman (which features Breaking Bad’s Aaron Paul and Will Arnett among the voice talent) and the fourth and final season of former AMC drama The Killing.

Other properties on the slate include a new project from the Wachowski brothers (The Matrix trilogy, Cloud Atlas) entitled Sense8, and Marco Polo, a large-scale project from executive producer Harvey Weinstein that has been shooting in Kazakhstan and Malaysia.

Chief content officer Ted Sarandos said the company is “really thrilled” with the latter, which is expected to debut later this year. “It’s a very ambitious project that’s coming together really beautifully,” said Sarandos.

Netflix will also make a foray into the talk show arena in 2016 with a new show featuring former E! personality Chelsea Handler. Talk shows don’t appear to naturally jibe with the binge-watching approach taken by many Netflix subscribers, but Sarandos said the show would not be as perishable as its network counterparts.

“The same way [that] people are not watching scripted programming the way they used to, they’re also not watching these late night talk shows in the way they used to,” said Sarandos. “They’re not watching them at 11:30 – they’re watching them days, weeks, sometimes months later, online or on stacked episodes on DVR.”

Sarandos said that an exclusive multi-year deal with Walt Disney Studios that will see the Netflix bring first-run live-action and animated feature films to its service is also shaking up traditional business models.

A single supplier arrangement, he said, is “not the historic norm.” The deal will see Disney titles come to Netflix within eight months of leaving theatres, also quicker than has traditionally been the case.

“For us it’s getting access to films [and] trying to continue to narrow that window so we can get them to consumers sooner and sooner, to deliver on the expectation that the internet has set up, for what I want, when I want, where I want,” said Sarandos.

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