Netflix Goes On a European Vacation

By Rick

Source: Netflix.

Just like a motor coach full of impatient tourists, a boy band, or fears of a euro collapse,Netflixis breezing through Europe this week. The world's leading premium video service debuted in Spain this morning. Portugal launches tomorrow. Italy rounds out the whirlwind tour with Netflix's debut there on Thursday.

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Three countries in three days isn't for the timid, but this is Netflix. It has a world to conquer by the end of the next year, and the clock's ticking.

Netflix's arrival in three popular European markets isn't a surprise. The dot-com darling announced these intentions several months ago. The only question that remains is if it's arriving too late to be successful.

The New York Times ran a piece over the weekend on the competitive landscape in Spain. With many of the earlier Netflix hits including House of Cards and Orange Is the New Black already available on existing digital platforms in the country -- secured through licensing deals long before Netflix dreamed of taking Spain on its own -- it will be a challenge to stand out.

Europe is particularly tricky given different content requirements and tastes of the continent's different nations. You can't just slap subtitles on Bloodline and assume that it's going to fly.

There's a reason why it's taken a few years to complete Netflix's rollout through Europe. It had plenty of obstacles when it rolled out in Germany and France last year. There's also the challenge of rival offerings, something that was already evident even when it first crossed the Atlantic to launch in Ireland and the U.K. three years ago. Netflix is running away with the domestic market, but it's launching in new territories now where it's the late arrival.

There's plenty riding on Netflix's success overseas. A whopping 2.37 million of the the 3.28 million in net additions that it secured in its latest quarterhailed outside of its home market. We've now had six consecutive quarters where most of Netflix's net additions have been international members. It's a trend that should easily stretch to seven quarters as the forecast for the current quarter calls for international viewers to account for 3.5 million of a record 5.15 million net additions. It's fair to say that this week's debut in Spain, Portugal, and Italy -- as well as the recent launch in Japan -- will factor into those numbers.

Expanding internationally isn't cheap. It's a drain on the bottom line. Netflix may have posted a year-over-year decline in profitability in its latest quarter, but that was despite a 37% surge in contribution profit for its stateside streaming business. With many key Asian markets on the expansion slate for early next year the bottom line at Netflix won't be very scintillating in the near term, but it doesn't have a choice if it wants to be truly global.

The world's appetite for streaming video is growing, and Netflix needs to place as many pushpins into the global map as it can before rival offerings dominate key markets.

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Rick Munarriz owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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