Netflix nears one million Canadian subscribers, with an eye to new markets

Netflix Inc. estimates operating losses of $80 million in the second half of this year as it expands into Latin America and plans another launch in at least one more country early in 2012, the company announced Monday. “Depending on content licensing discussions underway, we may launch one or more new countries in Q1 ,” CEO Reed Hastings and CFO David Wells wrote in a letter to investors discussing second-quarter earnings. “As in Latin America, we intend to offer a compelling mix of Hollywood, regional and local content.” The estimated losses for the second half of 2011 include pre-launch expenses for the country or countries to be added next year, with investments in new markets primarily in marketing and content, they said. The company didn’t give any further hints as to where it will go next but said it looks for consumer interest, broadband penetration and ease of acquiring “cost-effective” access to content. The company’s objective is to become profitable within two years of entering a new market. Netflix looks to be ahead of schedule in Canada, its first international market where it launched last September. While it reported a loss in Canada of roughly $10 million in the last quarter, it expects to come in between a $1-million loss and a $1-million profit this quarter, which will end around its one-year Canadian anniversary. The company reported 967,000 Canadian subscribers, just shy of its goal of one million by this summer, and it recently launched French-language support services. In a conference call with investors, Hastings said his company would launch with more content in Latin America, proportionally, than it started with in Canada. He said the Canadian experience taught him to be more confident in a successful outcome. “We started Canada pretty cautiously and then quickly built up the content, and we have more confidence, and so we're starting even stronger in relative terms in Latin America than we did in Canada,” he said. Netflix reported over 25 million total subscribers at the end of its second quarter, up from 15 million one year ago. The company said the DVD shipment side of its business has likely peaked, with nearly 75 per cent of new subscribers signing up for streaming-only service. Netflix drew the ire of some subscribers earlier this month by separating its U.S. streaming and DVD services into two plans, each costing $7.99 per month. “Some subscribers will cancel Netflix or downgrade their Netflix plans. We expect most to stay with us because each of our $7.99 plans is an incredible value,” the note to investors said. “We hate making our subscribers upset with us, but we feel like we provide a fantastic service and we’re working hard to further improve the quality and range of our streaming content in Q4 and beyond.” The company said it reached new agreements with Miramax and Revolution Studios for hundreds of movies, with NBC Universal for prior seasons of 30 Rock, Parenthood and The Office, and for exclusive syndication of the popular series Mad Men. “Netflix subscribers now have access to a wide range of programming from all four major U.S. broadcast networks and from nearly every major cable channel, as well as thousands of films, including those in their first subscription window, from Paramount, MGM, Disney, Lionsgate and a host of mini-major and independent studios,” the note to investors said. The company also downplayed its influence on cord cutting, or the cancellation of traditional television subscriptions, saying its service was complementary to, not competitive with, cable television. The note to investors said traditional television subscriptions grew in the first quarter by 500,000 households, “deepening evidence that cord-cutting in the past was prompted by economic hard times rather than the substitution of over-the-top (OTT) services for cable.” news@thewirereport.ca

Netflix nears one million Canadian subscribers, with an eye to new markets

Broadcast | July 26, 2011

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