Media & Entertainment

Netflix Predicts That It Will Wrap Up Its Global Expansion In Two Years

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If you live in a country that doesn’t have Netflix yet, you may not have long to wait.

In the shareholder letter accompanying its most recent earnings report, the company writes, “We now believe we can complete our global expansion over the next two years.”

Presumably that doesn’t mean an end to growth in international subscriptions (which would be, uh, bad), but rather establishing Netflix in every country where it intends to be available. The letter talks about how Netflix has launched in around 50 countries but has plans for “acceleration to 200 countries.” Up next: Launching in Australia and New Zealand towards the end of the first quarter.

Elsewhere in the letter, the company touches on one strategy that’s probably helping, namely partnering with cable and satellite TV operators in Europe.

Netflix says that it has “a good idea of the best approach” in each new market, though it also acknowledges that it will probably make mistakes along the way. If you’re wondering about China, the company says:

For China, we are still exploring options — all of them modest. We’ll learn a great deal if we can successfully operate a small service in China centered on our original and other globally-licensed content. That is our preference, for the next few years, if we are able to acquire the necessary permissions.

The letter also states that Netflix’s initial markets beyond the United States (namely “Canada, Latin America, the UK, Ireland, the Nordic countries and the Netherlands”) have become profitable, and that the company will “generate material global profits from 2017 onwards.”

This could be particularly important for Netflix given a decline in new subscribers in the United States. The company says it added 1.9 million new U.S. subscribers in the last quarter of 2014, compared to 2.3 million in the same period of 2014. With 39.11 million subscribers in the U.S. (compared to 17.99 million internationally), Netflix says slowing growth could be “a natural progression.”  At the same time, the company isn’t giving up:

It is increasingly clear that virtually all entertainment video will be Internet video in the future. We believe there is big growth ahead in the U.S. market for Netflix, even if we may not get there in a straight line of 6 million annual net adds. We’ll continue to improve our content, our marketing and our service, to eventually achieve “must have” status in most households.

Update: Asked during the earnings interview about what Netflix has learned from its previous international launches that makes it confident about future growth, CFO David Wells pointed to the popularity of the company’s original shows “across markets outside the U.S.”

At the same time, CEO Reed Hastings cautioned that it’s “easy to overgeneralize from our experience form Western Europe and Latin America.” He said that “not every piece of content will carry equally well,” but at the same time, there’s “a segment of the market in every country that follows Western, Hollywood, British content — and then we’re augmenting that with all kinds of local programming.”

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