Like in the old times when the empires were trying to expand their territories, in the world of entertainment big companies want to conquer more audiences and consumers. The changes in social behavior and technology don’t seem necessarily to lower the barriers of entry into global markets. This is the case of Netflix, which as many conquerors in the history, now is trying to expand its limits adding the European market to its scope.
Netflix is already operating in the UK, in some Nordic countries and in the Netherlands. The next logic move seems the launching of Netflix services into the most important markets in Eastern, Central and Southern Europe. Before that, there are many questions that should be answered:
- How much money does Netflix have to invest in this quest?
- How challenging will it be to face a region with different culture, languages, income per capita and other important factors?
- Is all of Europe technologically ready for the introduction of Netflix?
Due to the fact that Netflix should make a law and rights plan in a “Territory by Territory” basis, the key question seems to be WHERE to start?
The answer for most of the analysts is that France should be the first country to attack thanks to its film culture, its economy and its importance in Europe. In reality, the French market represents the No.1 challenge for the American company. Factors such as the high VAT rate (19.6%) for this kind of services, the high competition they have to face from companies such as Canal+’s service Canal play infinity and Wild Bunch’s Filmo TV will be a barriers into the Gaul’s market. Another important fact is that French market is from where Netflix obtains its European film content and still has a display window law that forces to delay 36 months the release of these content for SVOD services. If this were not enough, VOD companies with more than 10 million in revenues per year must reinvest the 15% in European movies and 12% for French movies.
The economic crisis and high incidence of piracy are factors that affect country markets in Eastern and Southern Europe. Internet consumers from countries like Russia and Poland in the East or Spain and Portugal in the south, have high incidence in illegal content and unauthorized sites.
Another important question is whether Europe is technologically ready for Netflix.
Believe it or not, there are countries like Italy where only 55% of the population has a good broadband service. The media in the rest of Europe is 72%. In most of the country the Internet service speed is as bad as 4 mbps while in UK it is 7-8 mbps.
In conclusion, although Netflix is a very strong company it seems that this is not the best time for the company’s D-day move. Especially after knowing that its economic situation is not strong enough due to the debt of $500 million it is already carrying and the $400 million they should need for investment in Europe. Let’s see in the future months what will be the end of the European version of an “American dream film”.