As a part of its global expansion strategy, video streaming service provider, Netflix, IncNFLX will launch its services in four Asian markets of South Korea, Singapore, Hong Kong and Taiwan in early 2016. The announcement comes a week after the company launched its services in Japan, its first Asian market.
The service will include access to TV series and movies in high definition as well as Ultra HD 4K on all Internet connected devices such as smartphones, smart TVs, tablets, PCs, gaming consoles and set-top boxes. The company will provide details on the prices and programming later on.
Netflix is aggressively expanding its services across the globe especially in emerging economies as the potential for subscriber growth is high. The company plans to cover 200 countries by 2016. So far this year, the company has launched its services in Australia, New Zealand and Japan and it expects to cover Spain, Portugal and Italy through the remainder of the year.
In addition, the company is planning to expand into China in 2016 and is reportedly in talks with local broadcasting executives in an attempt to enter the market. Though the market offers a lot of potential for subscriber growth, it is difficult to penetrate given serious competition from local streaming service providers. Analysts observe that forming partnerships with local players might be a good way for Netflix to begin its expansion in the country.
Recently, the Chinese online retail giant Alibaba BABA launched its video streaming service across China called Tmall Box Office. Alibaba is very strongly positioned in China given that it is the leading retail platform selling to the majority of Chinese consumers. So its launch of a rival service will certainly affect Netflix's plans of expanding in China. The company will most likely look to speed up its entrance into the Chinese market and obtain a solid hold there before Tmall Box Office gets strongly entrenched.
Netflix currently operates in 50 countries apart from the U.S. and boasts a subscriber base of over 65 million. In the last reported quarter, revenues from international operations soared nearly 48% year over year to $454.7 million driven by robust growth in paid members.
In the International Streaming segment, the company recorded 23.25 million members, up 68.5% year over year. It recorded 2.37 million net new members in the quarter, which more than doubled from the year-ago quarter while paid members grew 68% to 21.65 million. In the current quarter, Netflix expects to add 2.4 million subscribers internationally.
Over the long term, analysts expect International operations to contribute 80% to total revenues. However, with the company being in the investment phase as far as its International operations are concerned, margins will continue to shrink. Competition from other streaming service providers like Hulu, Amazon.com Inc. AMZN as well as Time Warner Inc.'s TWX HBO Now service is also an added concern.
At present, Netflix carries a Zacks Rank #3 (Hold).
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