Market Watch

Netflix Expands into Canada with Watch Instantly Service



Netflix announced July 19 it will expand its streaming services north past the US border into Canada. While the US online video giant will not offer disc rental by mail to Canadians, it will provide unlimited streaming of TV episodes and movies to PCs and a range of CE devices that currently support the Netflix Watch Instantly service. The company's first international venture is expected to launch later this fall.

Netflix did not divulge a few key details such as pricing, exact launch date or the specific platforms that will support Netflix in Canada.

US customers currently pay at least $8.99 a month for Watch Instantly access, which is provided as a value-add to the Netflix by-mail rental subscription plans (the $8.99 tier allows one disc out at a time with unlimited by-mail rentals and unlimited instant watching). The service is available in the US through video game consoles (PS3, Wii and Xbox 360), Internet-connected Blu-ray players as well as other consumer electronics devices, such as Apple's popular iPad (which has sold 3.27m units worldwide since its first launch on April 3).

Analysis
Canada is a good first target for Netflix to begin expanding its services internationally. The country benefits from high broadband penetration; 73.8% compared with 71.9% in the US. Availability of content licensing might have also played a role in the choice of Canada as Netflix's next stop. Most of the expenses related to developing the technology and signing content deals with major studios were already incurred for the US market so the cost of expanding its online service to Canada, a culturally and linguistically similar market, should be relatively manageable for Netflix.

Availability of the standalone streaming service via connected living room devices will be crucial for uptake as consumers have generally proven reluctant to pay to watch movies tethered to the PC. There are currently just two device-based services operating in Canada - Apple's iTunes Store and the Zune video marketplace on the Xbox 360 - and, unlike Netflix, these both offer movies on a transactional basis.

Assuming Netflix focuses on licensing movies outside the transactional release windows, as in the US, its standalone subscription service could face more direct competition from the TV Everywhere-type propositions being introduced by local pay TV operators. Like some of their US counterparts, Rogers and Bell Canada have launched over-the-top services, enabling their TV customers to access select movies and other content online, on demand, for free as a value-add for their core business.

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