Netflix 'mulling' European OTT expansions

Michelle Clancy | 30-01-2014

Netflix is actively pursuing plans to expand its footprint to France, and possibly Germany, according to reports.

The Wall Street Journal, citing the ever-popular "people familiar with the matter," said that the over-the-top (OTT) leader is well along in talks with the French Government to potentially launch before the end of the year in that country, the third-largest pay-TV market and sixth-largest broadband market in Europe.

Meanwhile, it's working on the content side of the equation, the report said, with talks with media companies about expanding its international licensing rights for more markets. So far, the company operates in the UK, Ireland, the Netherlands and the Nordic region.

A Reuters report in December kicked off the expansion rumours, claiming that Netflix executives had met with the French President's staff to discuss a possible launch.

"Netflix wanted information about the legal conditions that would affect its potential arrival in France," Reuters quoted an official at the President's office as saying.

And indeed, Netflix might need governmental intervention given France's strict regulatory requirements: a film cannot appear in an on-demand video service, such as that which Netflix offers, if bought as a monthly subscription until three years after its debut in cinemas. However, acquiring the content through an authenticated TV service has only a four-month window. So, it could likely be that Netflix would be looking to partner with pay-TV operators, as it has done with Virgin Media in the UK and Com Hem in Sweden.

The move to expand further in Europe smacks of opportunity if Netflix can meet the challenges. SNL Kagan expects the market for streaming video services in Western Europe to grow rapidly, reaching $1.1 billion revenue in 2017. That's up by two-thirds from 2013.

Netflix reported that its subscriber base exceeded 44 million members worldwide in the fourth quarter of 2013. The company garnered 2.3 million more US subscribers in Q4 and more than four million overall.

However, international expansion will be critical to Netflix going forward as it faces market saturation; with 110 million total TV households in the US, it's rapidly approaching a 50% penetration rate, which is far more than any of its traditional pay-TV rivals. In its guidance, it said it was on track to grow its US base by 11% healthy, but likely unsustainable in the long run.