Market Insight

Netflix to become available in Southern Europe in October 2015

June 09, 2015  | Subscribers Only

Irina Kornilova Irina Kornilova Manager – Research & Analysis, Broadband Media, IHS Markit

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European expansion of Netflix continues with new countries, Spain, Italy and Portugal scheduled to launch in October 2015. Netflix is currently available in 61 countries, including territories such as the USA, Canada, Latin America, UK and Ireland, Nordics, Benelux and France, GSA countries, Australia and New Zealand.

The service will launch with a selection of original content, including original series as Marvel’s Daredevil, Sense8, Bloodline, Grace and Frankie, Unbreakable Kimmy Schmidt and Marco Polo, original documentaries and kids’ content. All content will come with country-specific subtitles.

Members will gain access to Netflix Original feature films, with announced titles including Beasts of No Nation, Crouching Tiger, Hidden Dragon, The Green Legend, and The Ridiculous 6

Netflix will be available at launch on a number of connected devices including PCs, mobile devices and smart TVs, game consoles and set-top boxes.

The company is yet to disclose any local pricing information for these services, however,  in France, Germany, Austria, and Benelux the Netflix's monthly plan starts at €7.99 for Basic package (SD quality, 1 simultaneous stream), €8.99 for Standard (HD quality, 2 simultaneous streams), and €11.99 for Premium (Ultra HD, 4 simultaneous streams). IHS considers it likely that Italian, Spanish and Portuguese subscribers may expect to pay the same monthly fee. 

Our Analysis

Netflix continues its global expansion alongside the growth of its international subscriber base. In Q1 2015, the first full quarter after the expansion to Germany, France, Switzerland, Austria, Belgium and Luxembourg, the number of paid international members reached 19.3m, growth of 15% from Q4 2014.  International revenues reached $415m in Q1 2015, but with cost of revenues and spend on marketing international streaming business is made a loss of $65m in that time period.

Italy and Spain both have significant broadband markets comprising 12.1m and 10.7m households respectively. Portugal has a smaller broadband market with 2.6m broadband households. By 2015, penetration reached 60% in Portugal and Spain and 47.5% in Italy. However, success of OTT services such as Netflix are facilitated by the launch of high-speed next generation services capable of supporting the additional bandwidth demand of such services.

The launch of Netflix services in Spain follows the signing of a high-speed network sharing agreement between the Vodafone/Orange joint venture and Telefonica in mid-2013, and the launch of fibre-to-the-home services by the Vodafone/Orange joint venture in April 2014 (see more: https://technology.ihs.com/484420/vodafone-launching-joint-fibre-service-in-spanish-market

). In addition, Vodafone also announced a fibre sharing agreement with Portugal Telecom in 2014, and Italian telco FastWeb launched its ‘Superjet’ fibre-optic service with plans to expand further over the next 18 months.

Therefore, potential customers in some parts of Italy, Spain and Portugal can now sign up for broadband services which can comfortably support Netflix and other potential OTT services. Also, the potential market for Netflix in these countries is expected to grow, and by 2019 IHS forecasts that almost 80% of all Portuguese and Spanish households will have broadband access while a third of all households in both countries will have fibre connections. Netflix growth will face significant competition in Italy and Spain, less so in Portugal.

The SVoD market in Italy is dominated by standalone and bundled multiscreen propositions by two major Italian pay TV operators – Mediaset Premium and Sky Italia. Mediaset Premium holds the exclusive rights for Warner and NBCUniversal titles alongside Fox TV series. Sky Italia has exclusive rights for Sony Pictures and HBO content. At the end of 2014, number of average monthly users of Mediaset Premium Play reached 0.4m, whist Sky Go had over 0.8m users. Sky Italia has more pay TV subscribers than Mediaset Premium, which affect the number of users of its multiscreen service.  Both services have standalone SVoD proposition, similar to Now TV in the UK, Sky Online was launched in Italy in March 2014 and Infinity TV by Mediaset was launched in December 2013. Overall there were over 1.3m subscriptions to online video services in Italy by the end of 2014, majority of which were bundled with pay TV offerings.

There are two major players in SVoD market in Spain – Telefonica’s Canal+ with bundled and standalone service Yomvi and Rakuten owned standalone service Wuaki.tv – as well as handful of smaller services offering mostly independent content. There were around half million subscribers to online video services in Spain at the end of 2014 with a third of them to standalone services. In Spain Netflix faces competition not just from SVoD services but also from local broadcasters, RTVE, Mediaset Espana and Atresmedia. Both offer compelling ad-funded catch-up proposition with long-form content, much of which is available in perpetuity.

Portuguese subscription market is dominated by multiscreen offers from pay TV operators Meo and NOS, which offer bundled and standalone subscription services. Other than a handful of small international services no major local standalone SVoD services are present in Portugal (see more: https://technology.ihs.com/509324/lack-of-local-competition-in-portugal-leaves-pay-tv-and-international-services-the-online-video-market-leaders).

Netflix will swiftly become a major player in these markets, although the scale of growth will strongly depend on a number of factors, including pay TV partnership deals, content deals and marketing. Netflix has a strong pool of language specific and genre specific content from Latin America (in Spanish and Portuguese), which should help the company to develop the subscription base and tackle both local competition and the piracy issue.

IHS will be adding Netflix’s forecast in Spain, Italy and Portugal in the near future. Subscribers will be notified through the website when these become available.

Organization
Netflix
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