Netflix has the ambition to spread its services all across the world. To achieve this, the company is set to release in six new European countries. Please find the article here.
Netflix’s international division is running losses of $15 million this quarter, and these costs are predicted to rise to $42 million in the third quarter due to marketing and licensing costs in these new markets. Furthermore, these six new countries, especially Germany and France, are anticipated to be difficult markets for Netflix in terms of accustoming these viewers to American television and a US based service. Increasing costs and uncertainty about the success in foreign markets are characteristics of market development, a growth strategy involving selling an existing product in a new market. This can be highly risky in the short run as losses are bound to rise, causing liquidity and cash flow problems.
However, in my opinion, Netflix’s strategy is effective as it is a forward looking approach. While the disadvantages may seem overwhelming in the short run, if the company is able to survive this period, it can monumentally increase its customer base in the long run (expected to rise to 18 million subscribers in Europe). Also, in order to ease its transition into these markets, Netflix can use partnerships as suggested in the article to avoid casting an “invader” image while also gaining useful insights into the markets.
Personally, if Netflix was available in India, I would pounce on it! Soon, hopefully..