Market Insight

Netflix launches in Sweden, Denmark, Norway and Finland

October 18, 2012

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US disc-by-post and online video service provider Netflix has launched online streaming services in Sweden, Denmark, Norway and Finland. Customers in the Nordic region are now able to watch a range of local shows and movies via Netflix, in addition to the company’s catalogue of internationally-sourced content. Local subtitles are available for international shows.

The Swedish service is priced at KR79 ($12) per month, the Danish offer costs DKK79 ($13.8), the Norwegian service NOK79 ($14) and the Finnish offer €7.99 ($10.4) a month. Users are eligible for a month’s free trial after which they will have to pay the monthly subscription fee. As a part of the launch strategy, current premium subscribers of the Swedish streaming music provider Spotify are offered a free Netflix subscription for the rest of 2012.

The video content provider has inked several important regional content deals with CBS, Disney, FOX, Warner Bros. and Sony. Specifically the deal with Warner Bros is for the studio’s TV series and movies in the first pay-TV window. In addition Netflix has secured rights with several international and local video content providers such as BBC Worldwide, ITV Studios, Shine International, Nordisk Film, Scanbox, Svensk Filmindustri and Non Stop Entertainment. TV titles include Breaking Bad, Sherlock Holmes, Modern Family, Glee with other TV and movie titles to be added soon. The service also has a separate ‘Just for Kids’ section on the web site. The service adds support for the countries to its iOS apps with Swedish, Norwegian, Danish and Finish languages listed as supported languages.

New market expansion is the main strategic plan of the company for 2012. Previous international expansions included  Canada (2010), Latin America (2011) and the UK and Ireland (2012). Before the launch in the Nordic region, the company aimed to expand into Spain but due to growth in costs relating to domestic restructuring, expansion to the country was postponed.

For Q2 2012, the company had nearly 3.6m paying customers internationally, which is equivalent to 13 per cent of its global paying streaming subscriber base. Q3 2012 showed 22% growth Q-on-Q in the number of paying users internationally.

The growth in the number of paying subscribers is still being driven by markets such as the UK and Ireland, but the company expects to have r success in developed Western European markets such as the Scandinavian region. However, this expansion has come at a cost; third quarter 'contribution' from international subscriptions (revenue less content acquisition and marketing expenses) was a loss of $92m, an increase on Q2’s $89m – driven both by content acquisition in Scandinavia, but also by fierce ongoing competition for rights in the UK, which the company noted has driven up costs.

Similarly to the UK, the Nordic region has strong local and international online video players that may become a significant barrier for Netflix in creating a profitable business. Q4 2012 in particular is likely to reveal significant levels of competition for content and customers in the Nordic region. HBO is to launch by the end of 2012 its own branded OTT service - a joint venture between the Time Warner-owned broadcaster and Parsifal International. Scandinavian pay-TV operator (C-More) in collaboration with TV4 and Bonnier Group has also launched its movie service (Filmnet) ahead of Netflix and HBO at an introductory price of SEK49 ($7.4). In addition C-More has inked and renewed a big number of its studio deals with HBO, FOX, MGM, NBCUniversal, Sony and Paramount Pictures. The latest deal has been closed with Svensk Filmindustri distributor for a subscription VoD window for films, crime series and children’s programmes.

The incumbent OTT service from the Modern Times Group (MTG) Viaplay is also a strong player in the market. The service has deals with all major international and local distributers. Moreover Viaplay is present on a large number of connected living room devices including PCs, smartphones, tablets, smart-TVs, set-top boxes. A recent deal with Sony earlier in October 2012 made the service available to PlayStation 3 in Norway, Denmark, Sweden and Finland.

Other competitors include a local branch of Amazon’s Lovefilm, Bonnier-subsidiary SF Anytime and start-up Voddler with transactional VOD services, and broadcasters with free-to-view on-demand services such as SVT Player. Importantly, similarly to Netflix, many of the above competitors already distribute premium video content to different connected living room devices.

Netflix understands that having a solid content library available on a wide range of different devices is the way to attract wider audiences. The agreement with the Warner Bros for the first pay-TV window undoubtedly required a significant investment for Netflix, but is a content deal that could help the company compete with incumbent players as C More and Viaplay. However, as France Telecom found in France, with its costly foray into rights acquisitions for Orange Cinema Series, buying a small amount of premium rights may not be sufficient to drive significant additions. Nonetheless, Netflix has seen positive signs, with early uptake trends indicating better performance than the Canadian launch in attracting free users.

Overall, the Nordic region is an attractive market for online video content providers including Netflix. However fierce competition with incumbent players and with new international companies entering the space, the ensuing high costs of content deals and investment for sustainable business development should not be underestimated.

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