Netflix looks beyond US as competition mounts

By Natalie Sherman
BBC Business reporter

image source, Getty Images
image captionClaire Foy has won awards for her portrayal of the Queen in the Netflix drama The Crown

Netflix has come a long way since it started as a mail-order DVD rental service. It has largely been responsible for dragging television into the online world and its dozens of original productions such as House of Cards and Orange Is The New Black have helped it win a huge global audience.

Last year its programming became available in another 130 countries, bringing the total to more than 190.

But Netflix faces increasing competition from online rivals such as Amazon and Hulu, while television networks start to launch their own streaming services and make new shows available in binge-ready box sets.

Sky Atlantic, for example, has made all six episodes of the new drama Guerrilla - starring Idris Elba, Freida Pinto and Babou Ceesay - available to stream, meaning viewers will not have to wait a week for their next fix.

image source, Sky
image captionFreida Pinto and Babou Ceesay in the Sky Atlantic drama Guerrilla

Growth of US subscriptions, which account for almost 60% of Netflix's revenue, has also slowed.

Analysts and investors will closely watch its subscriber growth when results for the most recent quarter are released later on Monday.

The company, whose shares have jumped almost 30% in the past 12 months to just over $140, is expected to report revenues of $2.5bn, with the subscriber total tantalisingly close to the 100 million mark.

But some question how long Netflix can continue adding customers at the same pace.

How will international expansion hold up?

Netflix had more than 44 million international subscribers at the end of 2016, nearly 50% higher than the year before, as well as 49 million in the US.

It expects to add another 4 million to the international total this quarter.

Formerly sceptical analysts are increasingly confident that the firm can deliver. A consumer survey conducted for Jefferies bank in Germany and India turned up the surprising finding that services such as Netflix and Amazon are more appealing than local streaming options, despite potential language barriers.

The survey also suggested that Netflix's pricing could hold up, even in a wider variety of markets.

However, the company has warned that growth could be hurt if the dollar climbs much higher.

Who is watching its shows?

image source, Getty Images
image captionRobin Wright stars in House of Cards

Netflix started making its own shows in 2013, with House of Cards one of its first big hits and Stranger Things more recently. The company plans to spend more on original content this year and reduce outlays on licensed material such as movies.

Awards and critical acclaim for dramas such as The Crown have helped attract viewers. Yet analysts at Jefferies fear that cutting back on other content such as films could reduce Netflix's overall appeal.

Will it be affected by the Hollywood writers dispute?

Netflix casts a long shadow on the negotiations that started in March between the Writers Guild of America and production companies and studios over what writers are paid. The existing agreement expires on 1 May and a strike could be on the cards.

One of the main sticking points concerns residual payments for streamed shows and writers for some Netflix productions are covered by the agreement.

The growth of online television has also contributed to the rise of shorter series than on broadcast networks, which has meant lower fees for writers.

Netflix stands to benefit from any disruption to major broadcasters. It also has flexibility to withstand a work stoppage, since it's not bound by the traditional TV calendar.

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