Battered video provider Netflix Inc. (NASDAQ: NFLX) is launching its streaming video service in the UK and Ireland today with a one-month free trial for customers who sign up through Facebook. The service will cost about $9/month in the both countries. Netflix is entering a market currently dominated by Lovefilm, owned by Amazon.com (NASDAQ: AMZN), which claims 2 million customers in the UK, Germany, Sweden, Denmark, and Norway.
Netflix also faces competition from the BBC and the UK’s Channel 4, both of which offer free streaming video. Lovefilm, in a counter-move, today began offering unlimited streaming for about $7.50/month in the UK. Other competitors include Virgin Media Inc. (NASDAQ: VMED) and British Sky Broadcasting.
Netflix has already said that it will lose money in the first quarter because profits in the US will not cover the investments the company is making internationally.
The company’s early success with DVD rentals has caused the media providers more demand higher royalties, putting Netflix in a squeeze that forced the company to try to raise US subscription fees by 60%. The company’s ill-fated Qwikster launch in the US drained 800,000 customers from Netflix’s US subscriber base and caused the company’s share price to fall by more than -50%.
Whether or not Netflix can enjoy the same level of success in Europe that it once held in the US remains to be seen. Fierce competition in the US and internationally coupled with rising prices for content present strong headwinds to Netflix, which depends on subscriber fees for revenues and profits. Amazon, for example, essentially offers its streaming video service free to Amazon Prime members who pay an annual fee of $79 and also get free 2-day shipping on all merchandise orders.
Netflix shares are up about 4.5% this morning, at $90.11 in a 52-week range of $62.37-$304.79.
Paul Ausick
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