Netflix is to launch its streaming-only subscription service in Norway, Denmark, Sweden and Finland by the end of 2012. The company will offer both TV shows and movies, although no details have been announced about pricing, content deals and device availability; however, it is expected that both devices and pricing will be similar to other regions. Internationally, Netflix's streaming-only offer costs between BR$14.99 (£4.70) in Brasil and £5.99 in the UK.
The company is understood to be in talks with local video content providers, international studios and broadcasters in the region to create an attractive video content library prior to launch.
International expansion is the main strategic priority of the company for Q4 2012. Previously, Netflix has launched its streaming service in Canada (2010), Latin America (2011) and the UK and Ireland at the beginning of 2012. As of Q2 2012 the company had a little over 3m paying customers internationally, which is equivalent to 10.7 per cent of its paying subscriber base. However, this expansion has come at a cost; last quarter Netflix's 'contribution' from international subscriptions (understood as revenue less content acquisition and marketing expenses) was actually a loss of $89.4m.
Much of this can be attributed to the costs involved with Netflix's launch in the UK and Ireland where the company ended the quarter with over 1m members according to the company's letter to shareholders; IHS Screen Digest estimates that over 0.8m of these were paying subscribers. This rapid subscriber growth comes in the face of strong competition from Amazon's Lovefilm and local pay TV operator BSkyB.
Netflix's experience in the UK creates an interesting precedent for the company's potential in the Nordic region. In this case Netflix will again face a developed market with a number of established online video providers. The range of SVOD competitors includes Viaplay, from pan-regional pay TV operator Viasat; a local branch of Lovefilm; and, unlike the UK, a number of SVOD offers from local broadcasters such as TV2 Sumo (Norway) and TV2 Play (Denmark).
In order to compete against such services, the company will have to invest in its catalogue, inking deals for the best movies and TV series. It may consider buying second pay TV window rights for key content where the first pay TV rights have already been purchased, as Lovefilm UK has done. This sort of activity means that the company will probably have an appreciable content bill if it is to build the sort of library that is key to a compelling service. However, this is far from spelling doom for a Nordic launch, and the Nordic region has a number of features that make it an attractive opportunity for Netflix, including: a developed broadband infrastructure, high living standards, positive GDP growth; and, as the company pointed out after its UK launch, there are advantages to going into a market where consumers are already familiar with online video, as there is little need for customer education about the core value proposition.