Netflix Jumps the Gun in Sweden

When Netflix (Nasdaq: NFLX  ) announced its plans to expand into Scandinavia, the goal was simply to open up shop by "the end of 2012." With more than two months to go until popping the year-end champagne, the video maven got a jump on its new market.

The streaming video service kicked off in Sweden today, with Norway, Denmark, and Finland slated for debuts later this week. The company has been making local content deals and setting up the back-end infrastructure over the last six months, and managed to launch well before the holiday season.

Netflix will get promotional assistance from Stockholm-based music subscription service Spotify, and will advertise Spotify's services stateside in return. That's a natural pairing if I ever saw one. I can imagine the marketing messages now:

  • "Try Netflix -- the Spotify of movies!"

  • "Try Spotify -- the Netflix of music!"

The Netflix service is going up against some heavy hitters. Amazon.com (Nasdaq: AMZN  ) bought its way into digital movie services in Scandinavia and Time Warner (NYSE: TWX  ) has announced a digital HBO service here that doesn't require a subscription to the premium cable channel. Moreover, Sweden is home to the infamous piracy site, The Pirate Bay, as well as numerous homegrown media services. This will be a litmus test of the Netflix value proposition. If the company can succeed against all these headwinds, it should be smooth sailing in less competitive markets.

It's good to see Netflix delivering on its promises, ahead of schedule. The company reports earnings next week, giving us an opportunity to find out whether the Nordic project runs over or under budget.

And on that note, Netflix slipped in a couple of useful data points for curious investors. Swedes were invited to join "almost 30 million" existing subscribers. That would put subscriber counts near the top end of management's guidance for the quarter. As a reminder, the global third-quarter subscriber target ranges from 28.8 million to 30.1 million total subscribers.

The market is taking in the news with a yawn, and Netflix shares still trade at a 50% discount to 52-week highs.

While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These kinds of issues are must-knows for investors, which is why we've released a brand-new premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to both buy and sell the stock. We're also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.

Fool contributor Anders Bylund owns shares of Netflix and has created a bull call spread atop his shares. Check out Anders' bio and holdings, or follow him on Twitter and Google+. The Motley Fool owns shares of Amazon.com and Netflix. Motley Fool newsletter services recommend Amazon.com and 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.


Read/Post Comments (4) | Recommend This Article (1)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 15, 2012, at 7:32 PM, pauldeba wrote:

    Actually, they had 30.1 million subscribers worldwide at the end of Q2. If they actually have fewer now, the stock will drop to $30 a share or less next week. I think they have to be well over that now, even the biggest bears think it will be 31 million at 9/30 and another hundred k by now

  • Report this Comment On October 16, 2012, at 7:07 AM, TMFZahrim wrote:

    Not sure where you get that number from, Paul.

    From the Q2 letter to shareholders (http://files.shareholder.com/downloads/NFLX/1744212573x0x585...

    Domestic streaming, total subscriptions: 23.94 million +

    International, total subscriptions: 3.62 million

    =27.52 million

    9.24 million DVD subscribers, so you can get to 30.1 million by assuming (not kidding) 6.66 million US subscribers taking both DVD and streaming services. But the number "30.1 million" was never discussed in this release. Nor did it come up on the conference call, or in 2 presentations given by management since that report.

    So I'd love to see your sources. Feels like I may have missed a presentation or something.

    Anders

  • Report this Comment On October 16, 2012, at 9:33 AM, pauldeba wrote:

    The artciel says "subscribers". You said "streaming subscribers". You need to download the spreadsheet below the letter to the shareholders for detailed information - segment information tab Row 44, Column R:

    Consolidated

    Total unique subscribers at end of period

    Paid unique subscribers at end of period

  • Report this Comment On October 16, 2012, at 3:01 PM, TMFZahrim wrote:

    Fair enough. The Swedish service announcement only said "subscribers," presuming that European customers don't have much kinship with American DVD users. And thanks for setting me straight on the financial spreadsheet info -- I tend to forget that the document exists since most companies include such data in their press releases. The Netflix approach with multiple documents and an empty press release is a bit frustrating at times.

    Anders

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