What Factors Could Impact Netflix Internationally?



Netflix’s forecast for net additions

For 2Q16, Netflix (NFLX) has forecast net additions of 2 million international subscribers. This forecast is lower than its 2Q15 net additions of 2.4 million subscribers.

According to a report from ValueWalk citing research from Roy Morgan Research, Netflix had 1.9 million subscribers in Australia (EWA) in May. That was followed by local streaming services Stan and Presto with 332,000 and 142,000 subscribers, respectively.

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However, the ValueWalk report cites other research from Telsyte that says local streaming services such as Stan and Presto are growing faster than Netflix in Australia. As the chart above shows, Netflix had 34.5 million international streaming memberships in fiscal 1Q16 with net additions of 4.5 million. Currently, 42% of Netflix’s total streaming members are from international markets.

Brexit vote could also impact Netflix

Netflix’s international revenues made up 33% of the company’s total revenues of ~$2 billion in fiscal 1Q16. As Netflix continues to expand rapidly in international markets, it’s exposed to foreign currency risk. The Brexit vote could have a negative impact on Netflix’s international revenues and contribution losses.

Netflix operates in the United Kingdom through its subsidiary, Netflix UK. The company is expecting an improvement in its contribution losses for the international streaming segment. It expects its contribution loss to be $80 million in 2Q16. However, as the Brexit vote has caused the pound to weaken against the US dollar, it could impact Netflix’s international streaming revenues and contribution losses.

It’s important to note that Netflix doesn’t use foreign exchange currency contracts to hedge against currency fluctuations. Other media companies exposed to currency fluctuations include 21st Century Fox (FOXA) and Viacom (VIAB).

In the next article in this series, we’ll look at Netflix’s programming strategy.


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