Netflix picks odd time to expand in UK, Ireland

The payoff for CEO Reed Hastings' international push may take a long time.

By Jonathan Berr Jan 9, 2012 1:24PM
Image: Europe (© Photodisc/SuperStock)Netflix (NFLX) CEO Reed Hastings, whose blunders in 2011 will be dissected in business schools for generations to come, may be laying the groundwork for another whopper with his expansion into the U.K. and Ireland. The downside risk is huge.

For example, business leaders in the U.K. expect the country's economy to get worse in 2012, according to a poll released Monday.  A recent Goldman Sachs survey forecast that the U.K.'s gross domestic product (GDP) will rise 0.7% this year, down from 0.9% in 2011.

 Ireland, which got a $113 billion bailout in 2010, isn't in great shape either. Data from the Irish government says that the country's economy contracted by about 2%, worse than expected, in the third quarter. Ireland, which had the second-worst performing eurozone economy behind Greece in the third quarter, slashed its GDP forecast twice in December and now expects growth in 2012 of 1.3%.

Shares of the Los Gatos, Calif. company, which got pulverized last year, are trading up Monday morning even though Netflix admitted that it may not be profitable in 2012 because of its overseas expansion. Moreover, it is taking on a formidable competitor in Amazon.com's (AMZN) Lovefilm business. The 7-year-old Amazon business claims about 2 million members in the U.K., Germany, Sweden, Denmark, and Norway.

Hastings, who lost 800,000 customers in the third quarter, told Reuters that Netflix regained customers in the fourth quarter though he was vague on specifics, telling the news service ". . . we're doing great," and adding that the firm didn't need to raise additional capital. Maybe consumers have forgiven Netflix, or maybe they have forgotten about its missteps.

Netflix, though, has many challenges ahead, including rising cost for content. This is the year that Hastings will have to put up or shut up. Investors have grown tired of his empty rhetoric. If he wasn't a major shareholder, the CEO would have lost his job long ago.

Jonathan Berr does not own shares of the listed companies.
Tags: AMZNNFLX
17Comments
Jan 9, 2012 4:03PM
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I am one of the ex-Netflix customers who have never returned.  It was not so much the money as it was the impertinent way they went about it.  I don't like being blindsided and that is what

 they did.  Not sure I'll go back.

Ron

Jan 9, 2012 4:22PM
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I am a former Nexflix customer and will never go back.  It was not the rate hike but the way they did it. On top of that the "new" content was pretty outdated.  I will not be returning.

Jan 9, 2012 4:48PM
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Why is it when we're in the middle of a recession, big companies want to gouge us for what they can? Netflix was as dumb as Verizon wanting to charge us to pay them.
Jan 9, 2012 5:35PM
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I am with many of you, i really disliked the way they just hiked the prices on us.  I enjoyed the 1dvd & streaming plan.  I also knew they wanted to do away with DVD content.  So i downgraded to streaming, i also expected much more streaming content, and Netflix didn't come through.  
I most likely will cancel in March when they lose a huge part of their streaming library STARZ.  

I'm crossing my fingers that Amazon video service is easily accessible on the 360 and PS3 game systems in the near future.  I really dislike streaming the content from my PC.  

   




Jan 9, 2012 4:01PM
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U.K. economy down... they will be staying home and watching movies.... I would bet it is a good or at least not too bad a move... IF Netflix can survive the next year or two until expansion costs are covered. I like the move... and would have done it if I ran Netflix... Big gamble... but time will tell.
Jan 9, 2012 6:16PM
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Out comes the real reason for jacking prices
Jan 9, 2012 6:43PM
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I'm thinking pretty hard about bailing. Money is getting tighter all the time, and it is getting harder to justify the expense. I can rent three new releases at the supermarket for $8, but I rarely get much of anything from Netflix that doesn't seem to be drek or 10 years old.
Jan 9, 2012 5:11PM
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Netflix streaming is priced at a fare value. But don't let anyone tell you its great. DVD increases at Netflix was done at the wrong time and customers never like such a instant and big increase in costs. I am a Netflix streaming customer and I actually use Hulu and Amazon more and more. Netflix to me has just lost steam in new content.

I agree that much of the UK is slipping into a recessionary period and Ireland is facing high unemployment already. Worse then the US! But I am sure Netflix is looking for customers wherever it can find them at this point. I'm just not sure how many of them will stick.

Jan 9, 2012 7:39PM
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Netflix service in the States has been suffering with subscribers experiencing degraded streaming and new content that scrapes the bottom of the media barrel (you are overwhelmed by old martial arts films when searching for foreign films for example). A  US Postal Service slow down will result in less value for your dvd/bluray rental as well, going to a mom and pop video store actually saves you money, supports your local economy, and gives you fresh air and a little exercise. The only things Netflix has over Amazon Prime is the ability to stream to more mobile devices, a better search system, and queuing. Amazon Prime is Netflix's biggest competitor and could easily take the top spot with the aforementioned features.
Jan 9, 2012 7:59PM
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$8 a month beats the cable companies $50.  Plus no comercials. 

Jan 9, 2012 7:26PM
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Their online streaming movie selection is limited and not worth $5 a month. 
Jan 9, 2012 8:45PM
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Commercial free content is worth it. Netflix is still commercial free and to me that is all that matters. Try and find a content provider that will take your money and provide an advertising free experience? Not even DVDs, which you own outright, are advertising free. Bluerays are worst with mandatory previews before you can even start the movie.

At least Netflix still understands the value of commercial free content delivery. Watch your favorite show on Netflix without commercials for the first time is like eating a delicious meal without having to eat your vegetables. This is what paid media should be, if you can afford it. As soon as they add a single commercial, I am out. Even if I see so much as a single advertisement on the website or other menus. Until then, they have a loyal paying customer.
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I left when blindsided and I will never go back they can  die and go bankrupt as far as I am concerned    at   800,000 customers at    10 bucks a pop that's what  8 million a month lost income  times   what  was it   lets say   3 months now   that is   24 million  no matter which way you look at it .   How long and how many customers will you have to win back to make up that   24 plus million.  Figures don't lie    CEO's  DO   lol       I am glad I wasn't a  stockholder.  FIRE THE CEO     FIRE FIRE FIRE   give me the job   I will put  it back to the old way and pay system  first  thing!!!      
Jan 9, 2012 8:18PM
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they look better every day  dish network is sad, same crap day after day and slamming commercials on screen during movies,
Jan 9, 2012 7:18PM
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Kinda makes you scratch your head when one of those right wingers spout off about running the country like a business ....right? I have seen more idiotic moves in the past year than in all of the past 20 years...Reason? Our businesses are being run by heirs not people who built them.
Jan 9, 2012 5:06PM
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I am very happy with my Netflix plan.
Jan 9, 2012 5:38PM
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As a user of their service, I can only attest to their professionalism in dealing with the delivery of their product and the easy manner I can keep up with their plans. The cost is very reasonable, and having a Netflix subscription allows me to watch the first-rated films of my choice.

 

Which means, that if the company decides to branch out to other countries, they will be first backed up by their own first class service.  If this service persists, costumers will notice. And if costumers notice then other new  clients will notice as well. 

I am sure investors will be happy...

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