Leaving itself open to claims that it's spreading itself too thin, Netflix (Nasdaq: NFLX) has confirmed that it's launching its service in the Scandinavian countries of Sweden, Norway, Denmark and Finland.
The U.S.-based Netflix also has subscribers in Canada, Latin America, Ireland and the United Kingdom. In announcing the move in a news release, the company said little more than that it would offer its streaming service at a "low monthly price," noting "broadband Internet users in the Nordic countries can subscribe to Netflix and instantly watch a wide array of Hollywood, local and global TV shows and movies; many with high definition video and Dolby Digital Plus surround sound."
The region already has its share of streaming video providers, including Amazon.com's (Nasdaq: AMZN) LoveFilm and start-up Voddler (backed by Nokia and online art-house VoD site MUBI) which has just moved from Sweden to Norway. Also looking into the space is Acetrax, a VoD operator News Corp.'s (Nasdaq: NWSA) BSkyB picked up in May.
But competition isn't the only risk, says an analyst quoted in the Hollywood Reporter; there's also the cost of expanding operations into international markets when things are stretched a little thin at home.
"We continue to believe increasing competition poses a risk to both domestic and international subscriber growth and profitability--and with an unwavering plan to ramp international spending, we believe overall risk is heightened and are reiterating our 'sell' rating," Eric Wood, an analyst with B. Riley said in a story in the Hollywood Reporter. "We continue to believe that Netflix is currently spreading itself too thin--into markets that have proven more difficult than initial projects--and committing itself to incrementally significant capital/content requirements just as the U.S. market is becoming increasingly competitive."
Among other things bothering Wold, the story said, is that the Scandinavian market is relatively small, with about 8.4 million broadband households compared to the U.S. (85.6 million) and U.K. (20.4 million), so "even a significant penetration of the region over the next few years would be unlikely to generate any meaningful contribution."
Every VoD player in the market has its own way of attacking those eight million subs. LoveFilm uses subscription-based rentals along with mail-order DVDs; MUBI offers a limited selection of films for a short period "but at a very low entry price and with an 'all you can watch' subscription model;" and Acetrax tries to tie itself to smart TVs, having signed partnership deals with Samsung (OTC: SSNLF.PK), Panasonic (NYSE: PC), Toshiba and LG (NYSE: LGL) to embed its app on European sets, the story said.
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