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November 07, 2011
Netflix has confirmed it is planning to launch a streaming service offering movies and TV shows in the UK and Ireland in early 2012. The company has revealed that, similarly to Canada and Latin American countries, there will be no DVD-by-post service. Also, in keeping with the company's international strategy, Netflix is understood to be pursuing a content approach that is mostly made up of non-exclusive deals with the major content owners which is topped up with a number exclusive movie deals in the pay TV window, generally for rights that the major operators don't own (e.g. MGM (UK), Paramount (Canada)).
Pricing details have not been announced; however, it seems likely that the price for consumers will not vary significantly from other countries. In the US the streaming service costs $7.99 (£5) per month, same in Canada, in Brazil B$14.99 (£5.45), and in Mexico MX$99 (£4.69).
• Amazon-owned Lovefilm, which has already captured million plus users, employs the same model Netflix used to develop its US streaming business. Lovefilm is now concentrating on adding more exclusive content to its online proposition (recent deals include an exclusive deal with StudioCanal for streaming rights).
• BSkyB, the largest pay-TV operator in the UK, owns the rights to most of the premium movie content in this market and has been ramping up its online services as a value add to the key pay TV offer. It has recently launched a separate 'Sky Movies' iOS application serving on-demand movies, in addition to on-demand movies available on the 'Sky Go' service.
• Terrestrial broadcasters are highly engaged with their own online video platforms, which receive extensive on-air promotion and regular investment, e.g. in initiatives like YouView (the joint venture from the BBC, ITV, Channel Four, Channel Five, BT, TalkTalk, Arqiva).
Importantly, all these providers do what many services in other Netflix markets do not - offer a way to get online content delivered directly to connected living room devices (TVs, BD players, games consoles, etc.).
Competing with these incumbents on content is likely to be expensive for Netflix, particularly if the company is to start competing with Sky for the best movie and international TV rights, and Netflix is clearly aware of this. However, in doing that Netflix should be weary of the Orange experience in France: after going into sizable expense to acquire movie rights for its Movie Channel plus bundled IPTV movie VoD proposition, three years later, the operator is looking for an exit from the premium movie market having failed to build up a subscriber base necessary to sustain this business long term.
Despite all the difficulties, UK is a very attractive market with high GDP, reasonable broadband infrastructure and consumers accustomed to using legal online services. It is a market in which Netflix still appears confident it can prosper relatively quickly too: in its last set of financials, the company said that it would pause its international expansion plans after the UK and Ireland launch and concentrate on growing subscriber base to appropriate size for the next 'few quarters'. Nevertheless the challenges, and cost of breaking into the UK and building a sustainable business in the UK should not be underestimated.
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