Netflix Inc. (NASDAQ:NFLX) is stepping up its European invasion, but it won’t conquer the continent without a fight from the locals.
The U.S. video-streaming service said on Tuesday that it plans to expand later this year to Germany, Austria, Switzerland, France, Belgium and Luxembourg. The company currently operates in about 40 countries outside the United States, including the U.K. and the Netherlands, where the service has proved quite popular. The Netherlands will serve as the location for Netflix’s European headquarters beginning next year, according to a recent AFP report.
The latest expansion had been expected -- Netflix representatives met with French officials late last year to discuss terms -- but it won’t come without its challenges. In France, monthly subscription video services are prohibited from showing movies until three years after their theatrical release. The restriction is part of a strict window-release system devised in the 1980s as a way to safeguard cinema owners from declining profits due to shorter theater-to-television windows, but it has also been criticized as a hindrance to modern-day streaming services. Under pressure from the media industry, French lawmakers made some concessions in recent years, shortening the window for video-on-demand services to four months. But the limitations have made it difficult for CanalPlay Infinity, a Netflix-like service from France’s Canal+ Group, to gain significant traction in the way Netflix has in the United States. In a 2012 Op-Ed, the French journalist Frédéric Filloux called release-window restrictions a “relic of the VHS era.”
Elsewhere on the continent, Netflix will face stiff competition, including ProSiebenSat1’s Maxdome service in Germany, which is available for about 7.99 euros a month. Last year, Germany’s Sky Deutschland secured exclusive rights to the second season of “House of Cards,” meaning Netflix will have to hold off, at least for the time being, on streaming its own series. Moreover, Netflix will have to compete with the likes of Amazon.com Inc. (NASDAQ:AMZN), which launched its Prime Instant Video service in Germany and the U.K. earlier this year.
France and Germany, which have two of the most developed broadband networks in Europe, also offer Netflix the greatest promise as it seeks to diversify its customer base. The company boasts about 49.8 million subscribers, more than 70 percent of whom are in the United States.
In a news release Tuesday, the company did not lay out a timetable for the expansion, nor did it say how much the service would cost in the new countries or which devices would be supported. The company said further details would be available at a later date.