FXstreet

Netflix‘s international growth by a UK based research firm, Digital TV Research. The agency estimates that Netflix could potentially hit 17 million paying international subscribers by the end of 2014. At the end of Q3 2014, approximately 91% of the total international subscribers were paid ones which suggests that the total count could reach 18.7 million by the end of this year. This is slightly above our estimate, but does indicate Netflix’s growing presence in key international markets. Latin America has huge potential, but the adoption remains low due to low broadband penetration, dismal speeds and payment issues. However, that’s changing slowly and establishing a presence in this region is a great move from long term perspective. In addition, European markets offer something very similar to the U.S. in terms of customer quality and preferences, which suggests that the company’s chances of success are higher if it can fend off local competition. Furthermore, Netflix could possibly launch in Australia and New Zealand next year, further strengthening its international presence. Overall, the subscriber growth in international markets will remain strong in coming quarters, but the segment still lags far behind the U.S. in terms of profit contribution.



We estimate that international streaming business constitutes roughly 20% to Netflix’s value. Despite the expected strong growth in the subscriber base, profit per subscriber will remain low due to significant content and marketing investments. The metric does not include allocated research & development expenses and general and administrative costs. We estimate that average profit per subscriber (contribution profit) for Netflix’s international segment will total -$12.80 in 2014, as investments more than offset revenues. But the average profit per subscriber will grow to $30.00 by the end of our forecast period.


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