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Can Netflix’s European Market Expansion Strategy Deliver?

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Aug. 6 2018, Updated 7:30 a.m. ET

Strong local content portfolio is creating an opportunity

Netflix (NFLX) continues to strengthen its European presence through strong local content lineups. The popular non-English series La Casa de Papel in Spain and the German-based supernatural series Dark have gained immense popularity in those regions as well as globally. The Danish series The Rain became the biggest non-English original production to be viewed globally.

In Germany, Amazon (AMZN) Prime Video remains a dominant player with a 30.4% market share, followed by Netflix and Sky Go with 21.45% and 15.3%, respectively, according to research firm Goldmedia. The series Dark and the upcoming series Dogs of Berlin may continue to help Netflix boost its content demand among German locals. Italian original series Suburra and the French series Marseille were other hit series, allowing Netflix to penetrate the European non-English-speaking regions.

From the graph above, you can see Netflix’s total international subscriber growth in the last five quarters. During that period, it increased at a CAGR (compound annual growth rate) of 8.8%. It exited fiscal Q2 2018 with 72.8 million members.

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More focus on Spanish content

In July, Netflix opened its first production facility in Madrid as part of a partnership with Grupo Secuoya. The deal will allow the video streaming giant to develop more Spanish-language original content for local viewers. So far in 2018, Netflix has announced several content deals with Spanish broadcasters. Spanish content is widely accepted across the Latin American region, so Netflix is aiming at more Spanish series.

Netflix is also experimenting with a premium plan in Germany and Italy that costs $19.78. A user can watch 4K[ content on four devices at the same time, thus offering more flexibility and better quality.

Netflix has already invested ~$1.75 billion in more than 90 European productions and will further step up its investments going forward.

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