Even as Netflix faces a sustained backlash from customers over recent changes to its subscription pricing plan, the company is preparing to launch its service in Europe.
According to Variety, Netflix is planning on expanding to Spain and the United Kingdom in the first quarter of 2012. This is in addition to the company’s plans to expand into Latin America and the Caribbean.
Variety speculates that the cost international expansion could be one reason for Netflix’s decision to separate its DVD rental and streaming services into different subscriptions. We’re not so sure. It’s true that more customers in more countries will increase Netflix’s content licensing and acquisition costs, as separate deals will need to be worked out in each market. But it also means a larger customer base, for which it would make sense to keep prices low.
Instead, we see international expansion, a move that would be focused solely on streaming content rather not disc rentals, as another sign that Netflix is ready to get out of the disc-by-mail business. As the cost of obtaining and licensing streaming content continues to rise, Netflix needs to look at what costs it can cut. The fixed costs for mailers, warehouses, distribution centers and physical disc purchases are ripe for trimming.
In Europe, Netflix will face significant competition — from Amazon-owned Lovefilm in the UK, and services like the Playstation3-based Mubi across the continent. Still, it’s a market with huge opportunities, not just for Netflix, but for content creators and studios.
More About: DVD rental, europe, netflix, Spain, streaming, uk, video
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