news Pioneering online TV and movie streaming service Netflix has given a strong indication that it has no immediate intention to launch in Australia, despite having last week announcing plans to expand to the UK and Ireland early next year.
The company, along with similar services such as Hulu, has grown rapidly over the past few years as Internet users have increasingly demonstrated their preference for online streaming services which allow them to choose what content they can watch and at what time. Netflix offers a variety of both television shows and films for consumption.
The company currently boasts more than 25 million customers in the US, Canada and in Latin America, where the company operates in some 43 separate countries. Its services are available through a plethora of platforms, including direct to modern televisions connected to the Internet and gaming consoles such as Microsoft’s Xbox 360 system.
Responding to an emailed question about any Australian plans, a Netflix spokesperson said the company didn’t comment on its international expansion plans. However, they highlighted a statement (PDF) the company made during its latest financial results briefing session last week, where it stated that after launching in the UK and Ireland in early 2012, “we will pause on opening new international markets until we return to global profitability”.
“For a few quarters starting in Q1,” the company added, “we expect the costs of our entry into the UK and Ireland will push us to be unprofitable on a global basis; that is, domestic profits will not be large enough to both cover international investments and pay for global [general and administrative expenses] and technology and development.”
Despite the comments, Netflix made substantial amounts of operating profit in the latest quarter, pulling in $821 million in total revenues in the three months to September 30 and earnings gross profits of $285 million and net income of $62 million.
However, the company’s profitable operations remain based in the US, where it has the overwhelming majority of its customers. In Canada the company now has over one million customers, and in the Latin American region, where it launched in 43 countries in September, it has numbers in the hundreds of thousands.
The UK, Netflix noted at the time, had about 20 million households, with a very high broadband penetration, although less residents paid for subscription TV offerings, compared with the US and Canadian markets. “The UK market is similar to Canada in that online piracy use is reasonably small and nearly everyone has a debit or credit card, unlike Latin America,” Netflix noted. “In general, UK ISPs do not have Canadian-style low broadband usage caps.”
News of Netflix’s lack of interest in Australia comes as alternative players — such as FetchTV, Telstra with its T-Box package and Netflix clone Quickflix have recently started to ramp up their IPTV and online movie on demand plays locally. Customers have long complained about the lack of legal streaming online film and TV viewing options in Australia, leading to what many have characterised as high levels of content piracy locally.
You can see why Netflix doesn’t consider Australia a major market — we’re too small, and there are better opportunities in Latin America and Europe. With Canada only making a small profit for the company, one can imagine it would be making even less from Australia, where the cost of bandwidth is high.
However, I do think Netflix is missing out on an opportunity. There is very little competition in Australia in the IPTV and movie on demand market right now. A major play from Netflix could grab the lion’s share of the market. Australians are crying out for this kind of service. In the meantime, it looks like it’s going to be up to players like FetchTV and T-Box, with Quickflix bringing up the rear, to try to make something happen locally.
Image credit: Netflix