"We plan later this year to embark on a substantial European expansion." That's what Netflix CEO Reed Hastings and CFO David Wells told investors last week, and it looks like the streaming service will make good on those claims. The company is working to strike deals with American content owners to stream shows and movies in Germany, France, and other European countries, according to The Wall Street Journal's sources.
It's far from the first time we've heard word of Netflix expanding further into Europe, but — combined with the official statements last week — it appears the company is seriously moving to gain a foothold in the fourth- and sixth-largest markets in the world by number of broadband subscribers. In Europe, Netflix currently has a presence in the UK and Ireland, as well as Norway, Denmark, Finland, and Sweden. Last September the company moved into the continent when it expanded into the Netherlands. In total, Netflix is now in 41 countries around the world, with many in Latin America.
"We plan later this year to embark on a substantial European expansion."
There's a reason why Netflix is looking to continue its international expansion. Hastings and Wells' letter to investors added that "Our success this year in international net additions and shrinking contribution losses confirms our belief that there is a big international opportunity for Netflix." While the company still doesn't make money abroad — it posted a loss of $274 million abroad in 2013 — its losses are narrowing and subscriptions are going up. And, more importantly, building a streaming service in a new country is always an expensive process — Netflix has to make the content deals before it can get any subscribers.
That process is reportedly now underway for at least Germany and France, and it's said that Netflix has been preparing for such a move by locking down exclusives abroad as part of its US content deals. Additionally, "a person close to those talks" tells The Wall Street Journal that Netflix has been in discussions with the French government about bringing the service to the country. Rules in France could make it difficult for Netflix to survive there, however: taxes are high, movies are prohibited from such streaming services for three years after they hit theaters, and the company would be required to help pay for French video content.
No matter where Netflix goes next, however, it will face competition: local broadcasters and others like Amazon have pushed into European countries with similar services over the years. Like in the US, it may all come down to who has the content.