If not one of the first, Netflix is the leading internet TV provider with the most subscriptions in the states. They see faster and more accessible internet as an opportunity to build their platform on. In recent years, they are looking to expand into unreached countries such as New Zealand and Europe. However, there are still a few hurdles to overcome in order to reach a successful international scale:
Domestic vs. International Margin Contributions:
So far, domestic streaming contribution is still much higher than Netflix’s international streaming contribution despite already having subscribers in 40 countries worldwide. Forbes predicts that what stands between Netflix’s domestic and international success are content acquisition costs.
Technical Barriers:
Further content acquisition costs due to technical barriers. E.g. censorship, language, and other localized contents that need to be tailored for specific countries.
So how will Netflix overcome these barriers while not compromising current user experience?
Well, Netflix’s long term view and consistent expansion seems to be what investors and consumers hold on to. Their strategy is to grow content spending plus marketing more slowly than they grow revenue, so still keeping the promise of providing new content. And while content acquisition costs might be an impeding factor to their growth rate, they are negotiating these costs as fixed costs. Over time, these costs will be more spread out as they gain more subscribers.
However, there’s a catch: to successfully gain more subscribers worldwide, Netflix will see their marketing expenses go up (at least in the short run).