Netflix begins a costly push in the U.K. and Ireland

January 9, 2012 01:43 PM

It took four years of development and will likely push the company into the red in the near term, but Netflix Inc. is now live in the United Kingdom and Ireland.

To spur interest in the launch, Netflix, No. 13 in the Internet Retailer Top 500 Guide, will use Facebook to offer interested subscribers a free trial for 30 days.

“We have spent the last four years building and refining streaming players for the major game consoles, smart TVs, Blu-ray players, tablets, and mobile phones, as well as Mac and PC-based computers,” Netflix chief product officer Neil Hunt writes in a new posting on the Netflix corporate blog. “We have honed and refined the apps based upon our experience in the Canadian, U.S. and Latin American markets.”

After the free trial, Netflix will charge subscribers in the United Kingdom and Ireland monthly membership fees that range from 5.99 pounds ($9.24) to 6.99 pounds ($10.79), the company says. To promote the free trial, Netflix will use Facebook to let users sign up—and post content that will eventually lead to more streaming and digital download content. “The link between members’ Netflix and Facebook accounts provides for seamless sharing of ideas for shows and films to watch,” says Hunt. “Whether you are watching on a smart TV, game console, computer or mobile device, you’ll see suggestions based on what your friends are watching.”

Netflix is now live in several international markets. In September, Netflix rolled out its streaming and digital download service to Mexico, Central America and the Caribbean.

The plan by Netflix to expand into the U.K. and elsewhere is expensive and comes at a time when Netflix is trying to shore up its battered finances. In November Netflix revealed plans to raise about $400 million in capital—a move that deepened the descent of the company’s stock price over the second half of the year.

The move to launch in the U.K. also will cause Netflix to post a loss, potentially in the first quarter, CEO Reed Hastings told investors in his third quarter earnings letter released in November. The company, which reports its year-end financials Jan. 25, is also forecasting lower sales and net income for the fourth quarter.

“For a few quarters starting in Q1 we expect the costs of our entry in the U.K. and Ireland will push us to be unprofitable on a global basis,” Hastings said. “Domestic profits will not be large enough to cover both international investments and pay for global general, technology and development expenses.”




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