Netflix's European Vacation

Let's take a break from feeling extreme angst over the new service plans from Netflix (Nasdaq: NFLX  ) -- there's actually other news about the company today.

Hollywood rag Variety reports that Netflix has figured out how to enter Europe. According to Variety's connections inside European film distributors, Netflix is going to Spain and the United Kingdom next.

Hot on the heels of a pan-American and Caribbean expansion in 2011, Netflix is looking at the already contested British market alongside the radically different Spanish market for an early 2012 introduction.

  • In Britain, Amazon.com (Nasdaq: AMZN  ) already established a foothold in streaming video services by buying local provider Lovefilm. Netflix will have to fight for every inch of this battlefield against an existing rival with nearly 2 million subscribers.
  • Spain doesn't have an incumbent provider like Lovefilm, but is known as a piracy hub. That's a very different set of challenges, though Netflix should be able to apply lessons learned in South America in many ways.

After invading its first European shores, Netflix would then expand -- either slowly, like in North America, or suddenly, like its incursion into Latin America -- to the rest of Western Europe. Covering the Old World, from Greece to Iceland and Portugal to Finland, would open a potential market of more than 400 million people with generally advanced access to broadband Internet connections and reasonable disposable income levels.

The early bird gets a nice breakfast, and Netflix is an early worm hunter here. Amazon will definitely put up a fight and might have expansion plans of its own. For other tech giants to catch up, they'd need to make some drastic investments in basic technologies, networking infrastructure, and studio relationships, which is a rare combination in the wild today.

Apple (Nasdaq: AAPL  ) has the networking and technology components figured out but lags in Hollywood ties; Google (Nasdaq: GOOG  ) is in roughly the same boat; and whoever buys Hulu will get the cozy studio relationship and completed technology puzzle without the global reach.

Expect analysts to ask some tough questions about international expansion when Netflix reports earnings next week. Oh, and remember those pricing changes I asked you to forget for a while? We need to know more about how that move fits into the plans for global domination as well. I'm thinking that it's all connected.

Fool contributor Anders Bylund owns shares of Google and Netflix, but he holds no other position in any company mentioned. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Netflix, Apple, Amazon.com, and Google. We have also recommended buying puts in Netflix and creating a bull call spread position in Apple. 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. You can check out Anders' holdings and a concise bio, follow him on Twitter or Google+, or peruse our Foolish disclosure policy.


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  • Report this Comment On July 18, 2011, at 3:43 PM, Metrobank wrote:

    You guys sure look at NFLX with "rose colored" glasses. What I see is a desparate attempt to hype the future at the same time they are messing with their core subscriber base. It will be expensive to go into all of those markets which will negatively impact earnings as we saw with Canada.

    While all this is going on, they have some hefty capital requirements to meet to buy content with not enough cash to meet all of its off balance sheet obligations. And by the way, why aren't these obligations listed on the balance sheet as they are real cash obligations?!

    Good luck with their expansion, I see it as inflating their risk.

  • Report this Comment On September 22, 2011, at 8:10 AM, MSSRAL wrote:

    Thanks for these positive comments. While Netflix is one of your core recommendations, more info like this should be on your site. My husband and I are streaming subscribers and continue to enjoy movies at home. We are in our mid seventies. Netflix has and will continue to give us many hours of enjoyment. We are also Netflix shareholders.

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