Netflix Pulls Out Its Passport

Just before Halloween, Netflix (Nasdaq: NFLX  ) said it would its first launch European video streaming services "in early 2012." Looks like the company made good on that promise: The year is just over a week old, and Netflix has scared up streaming access in the U.K. and Ireland.

What's new, pussycat?
The British Isles are treated to the same free trial month as new American subscribers get, and then they'll pay 6 pounds sterling or 7 euros a month. That converts to about $9 at today's exchange rates, or 15% more than we pay over here.

For that princely price, punters get access to TV and cinema content from local powerhouses BBC and Channel 4, global powerhouses Walt Disney (NYSE: DIS  ) and Lionsgate (NYSE: LGF  ) , and more. For the studios, I think it's a no-brainer to let Netflix do the heavy distribution lifting worldwide while they sit back and collect their increasingly impressive license checks.

Some of this stuff isn't available to American streaming customers today; I envy the British access to The Princess Bride and Once, but they can have Paul Blart: Mall Cop all to themselves for all I care. Other U.K.-only movies that might make you want to take vacation in London include O Brother, Where Art Thou?, Fast Times at Ridgemont High, and The International.

But let's be clear -- this is mostly back-catalog content, same as we're used to in the States. Don't hold your breath for new releases like Colombiana and Kung Fu Panda 2 to show up in this catalog.

Too late the hero?
Netflix's hardware lead looks a bit smaller across the pond. The number of compatible Blu-ray players, smart TV sets, and standalone digital-media boxes is literally legion here. Europeans only have home theater systems and Blu-rays from Philips or Western Digital to choose from. Well, aside from the totally global reach of Android and iOS gadgets and gaming consoles, of course. iPads and Xboxes will be the very pillars on which Netflix's overseas strategy stands or falls.

So it's a mixed bag of content, presented by a smaller hardware army than the company is used to in other key markets, the same hardware lead often cited as a competitive advantage. Moreover, Amazon.com (Nasdaq: AMZN  ) has stolen the first-mover advantage in Europe by buying local Netflix clone Lovefilm.

On the other hand, the service is supported by Facebook integration and the "just for kids" feature at launch. And Lovefilm doesn't stream those juicy new releases, either. In America, Amazon does offer pay-per-view rentals of fresh titles. So I think it's fair to say that the competition is more mature in the homeland of Hollywood.

Give us tomorrow
CEO Reed Hastings says that this offering will be a drag on earnings in 2012. You have rollout costs, marketing to a totally fresh demographic, and 100% free trials in the first month. When Netflix reports earnings in a couple of weeks, the British adventure will loom large in the background, but you should actually pay more attention to the progress in South America and the Caribbean. That market sets the template for European offerings to follow, including the U.K.

Will this Halloween story continue to scare investors in 2012, or can the zombie stock find new life in the new year? Add Netflix to your Foolish watchlist to keep tabs on it all.

Netflix's overseas exploits might be off to a rough start, but America still rules consumer markets everywhere. Read up on three growing American empires in this special report, free for a limited time.

Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies mentioned. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services have recommended buying shares of Netflix, Walt Disney, and Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.


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