US movie streaming service Netflix will launch in the UK and Ireland early next year, bringing a significant new competitor into the UK’s film rental market. The launch takes Netflix further in its strategy of worldwide expansion, but comes at a time when it has recently seen difficulties among its US subscribers with its policy of separating its DVD and streaming services into two separate services, each charged at $7.99 (£4.99), and together costing more than the combined service previously cost.
Last night it unveiled rising profits compared to the same time last year, at $93.6m for the three months to the end of September, but down on the previous quarter. Domestic subscriber numbers were falling, with net US subscriber additions in the third quarter of its financial year down by 0.81m – a drop of 145% compared to the same time last year. International subscriptions were up by 0.51m. In a letter to shareholders Netflix said the past few months had been “difficult for shareholders, employees and, most unfortunately, many members of Netflix.” It said: “We think that $7.99 for unlimited streaming and $7.99 for unlimited DVD are both very aggressive low prices, relative to competition and to the value of the services, and they are the right place for Netflix to be in the long term. What we misjudged was how quickly to move there. We compounded the problem with our lack of explanation about the rising cost of the expansion of streaming content, and steady DVD costs, so that absent that explanation, many perceived us as greedy.”
It also said international expansion would be on hold following the launch into the UK and Ireland, which it warned, would “push it to be unprofitable on a global basis” for several quarters, explaining that, “domestic profits will not be large enough to both cover international investments and pay for global G&A and technology and development.”
UK viewers using the Netflix service will be able to watch film and TV shows streamed via the internet on their TVs, computers or other devices capable of streaming Netflix from the internet. US users can currently stream this content over more than 700 devices, from smartphones and tablet computers to gaming consoles, internet-connected TVs and PCs. However Netflix said today details of which electronic equipment would be supported in the UK would be available nearer the time.
It’s also not yet clear how much UK users will pay. By comparison, leading film rental service Lovefilm, now owned by Amazon, offers its 1.7m members in the UK and Europe DVD rental alongside online streaming. Its monthly subscriptions start at at £5.99 while unlimited streaming packages start at £9.99 a month. Lovefilm has around 70,000 titles on offer and streaming is through a much more limited range of devices: the iPad was recently added to laptops, internet-enabled TVs and PlayStation 3 consoles.
Netflix has more than 25m members in the United States, where it first began streaming in 2007. Last year it launched in Canada, and added 43 Latin American and Caribbean countries in September 2011.
