Netflix Enters Asia, and Why That Matters to U.S. Viewers

Before you go, we thought you'd like these...
Before you go close icon
Eastern Grey Kangaroos (Macropus giganteus) Wilsons Promontory National Park, Australia  Day   Eastern Gray Kangaroo   Full Leng
Getty Images
Netflix (NFLX) is at it again. The world's leading premium video streaming service rolled out in Australia and New Zealand on Tuesday.

This is a big deal for investors. It's Netflix's first foray into Asia-Pacific, and the payoff can be substantial as it pushes deeper into the populous region. Netflix has made international expansion a priority, announcing earlier this year that it expects to complete its global rollouts by the end of next year. The aggressive push is expected to deliver material profitability by 2017.

However, it's not just shareholders who should be applauding the new stamps on Netflix's passport. The streaming platform's growing subscriber base -- up to 57.4 million accounts worldwide when the year began -- also makes it more likely that Netflix will retain and add compelling content.

The Dream Stream

Programming doesn't come cheap. Licensing deals for movies and shows cost money, and naturally it costs even more when the streaming service is bankrolling the production of original or exclusive content.

Netflix has an unspoken arrangement with its members: If users are loyal and growing in number, Netflix has more money to throw at new digital programming.

We don't have to guess. Netflix recently began breaking out how much it has on its books in content streaming obligations. That figure has exploded from $5.7 billion at the end of the first quarter of 2013 to a record $9.5 billion at the end of 2014. That's an impressive 67 percent increase through seven quarters of operation.

That wouldn't be possible if Netflix wasn't growing in popularity, and naturally that's exactly what is happening. Its user base has grown from 36.3 million to 57.4 million in that time, an impressive 58 percent spurt in less than two years. A major driver in that uptick has been Netflix's success in expanding overseas. Netflix's U.S. subscriber count has increased 34 percent to 39.1 million through those seven quarters, but it's been a 156 percent pop to 18.3 million outside of this country.

Thanking Netflix for Being a Globetrotter

There is a price to pay with breaking into new territories. Netflix needs to secure the homegrown content that's popular in a particular country. It also needs to broker deals to include existing shows and movies as part of the licensing arrangement, following that up with the need to offer up dubbing or subtitles of the content it makes available.

However, there's no denying that a lot more is possible when things are going well. It doesn't cost three times as much to strike a deal for content that will be accessible to an audience that is three times as large. In fact, Netflix's global girth is an advantage. Studios want their content to be experienced as widely as possible, and that makes Netflix the first if not only choice in doling out digital licensing rights.

Netflix is living up to its end of the bargain. It continues to add new and in some cases exclusive content. It announced earlier this week that it would be premiering Chris Tucker's first stand-up comedy special. Last month it revealed that it would be teaming up with Judd Apatow to bring a Pee-wee Herman sequel exclusively to Netflix's global audience.

Netflix is growing, adding more than a million members with every passing month. It obviously matters to investors, but it's also a pretty sweet deal for fans of streaming television.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.
Read Full Story

People are Reading