Netflix's European Expansion Raises The Investment Bar

BMI View: Netflix's long-anticipated expansion into Europe's largest broadband and pay-TV markets will force its competitors and partners to innovate on pricing and services, provide new content creation opportunities for local producers and drive sales of higher-end connected devices such as smart TVs and games consoles. While many incumbents will now ramp-up competition-based strategies, we believe there is substantial upside potential to be exploited through collaboration.

The US-based video streaming service provider is to launch services in Austria, Belgium, France, Germany, Luxembourg and Switzerland in 2014. Prospective customers are invited to sign up to receive more information regarding launch dates and pricing plans. Netflix already operates in Denmark, Finland, Ireland, the Netherlands, Norway, Sweden and the United Kingdom, all of which have contributed handsomely to the 1mn-plus quarterly net additions averaged by the international streaming unit over the last two years.

Netflix has said that this expansion will be accompanied by a USD3.2bn investment in its global content portfolio to help broaden its appeal in its target markets. Details are scant, but BMI believes that a considerable sum will be invested in the creation of original local-interest content and that Netflix will reach out to local media companies to achieve this goal. Netflix's expansion will therefore provide a welcome boost to the global profiles of Europe's media production industry as well as the regional economy. Original series premiered in the Norwegian and Swedish markets have received considerable international acclaim, for example. Meanwhile, Sky Deutschland - which is in acquisition talks with its UK sibling BSkyB - has said that increased investment in locally-produced content would be essential to its expansion strategy.

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