VIDEO-STREAMING service Netflix was launched on the Irish and British markets this week with a library of films and TV shows that one of its staff says would take several lifetimes to watch.
Netflix chief executive Reed Hastings says the company is not so much dipping its toes in the waters of two new markets, as plunging right in.
Late last year, the company told shareholders it was planning to spend between $60 million (€46.8 million) and $70 million on its international expansion. “That’s a big commitment,” Hastings says.
Nevertheless, Netflix is being coy about the number of subscribers it is hoping to sign up. Hastings says its initial aim is to attract people who are “passionate” about the service and to expand from there.
Netflix entered Canada a year ago, a market with 30 million people, and it now has one million subscribers there. The Irish and British markets have a combined population of 65.5 million, but Hastings will not say if two million across both countries would be a good result.
In Britain, Netflix’s launch was seen as the US newcomer throwing down the gauntlet to homegrown operator Lovefilm. Ireland has no comparable service, but Hastings agrees that Netflix is not short of competitors in the shape of existing platforms such as Sky, UPC, DVD chains and more indirect rivals such as social media.
Ultimately, Netflix is here because it is chasing a share of a global market that analysts believe could potentially be worth $77 billion (€60 billion). It already has businesses in 47 countries; Ireland and Britain are just the latest stage in its expansion, and presumably they will not be the last.
The US company is not short of content: Netflix corporate communications director Joris Evers says it would take several lifetimes to watch all of it. But consumers may find it a bit of a mixed bag. Sky, its biggest competitor, and the biggest platform in digital and satellite TV in Ireland and Britain, has first call on a lot of content.
Netflix is either behind Sky in the queue for content or it has no rights to it at all, as in the case of HBO, the US producer known for shows such as The Sopranosand Boardwalk Empire,and Hollywood producer Warner.
That is not to say that Netflix is only getting crumbs. It has deals with the likes of MGM, whose big-ticket production this year is Peter Jackson's adaptation of JRR Tolkien's The Hobbit, the forerunner of the Lord of Ringstrilogy. It also has relationships with film and TV producer Lionsgate and Momentum, a backer of independent films in the US.
However, Netflix has to wait for the blockbusters currently showing at your local cineplex. Steven Spielberg's War Horse, due for release here next week, will become available on the Netflix platform in about 15 months' time.
Netflix acts as a library. You pay it a subscription of €6.99 a month in the Republic, and it gives you unlimited access to the titles in its archive. The TV shows are available season by season, “like a box set”, says Netflix head of content Ted Sarandos.
Its business model, monthly subscription for unlimited access, means it ends up occupying a particular slot in the film distribution chain. Hollywood producers, particularly the majors such as Paramount, Sony and Disney, want you, as far as possible, to pay every time you watch one of their films.
So you buy a ticket when the film is in the cinema, rent the DVD or are charged to watch it on pay TV, and then there are the premium TV rights. A company like Netflix comes after that. Sarandos acknowledges that Netflix gets many of its movies "after the pay TV window". He argues that if you really want to see War Horsenow, you'll go to the cinema. However, once the films are in the Netflix library, subscribers can access them any time and through any number of devices, including laptops, PCs, tablets or even consoles such as the Xbox, Sony PlayStation and Nintendo Wii.
In a new departure, Netflix has started producing its own content. The first is a show, Lilyhammer, starring Steve Van Zandt – Silvio Dante from The Sopranosand an E Street Band guitarist – as a mobster who has to move to Lillehammer in Norway under the witness protection programme. Sarandos says the misspelling in the title is deliberate.
It is also producing a version of the political drama House of Cards, directed by David Fincher and starring Kevin Spacey.
While Sarandos is clearly enthused by both projects, unfortunately they will not be available here at the same time as in the US.
It would be premature to suggest that this strategy is an effort to take on HBO. Whether Netflix produces content itself or buys licences, it needs revenue to give it the financial clout to acquire content. Hastings acknowledges this in a roundabout way by saying Netflix can outbid rivals for the rights to screen content, so the current status quo, where it is further down the queue than it might like, “will not last forever”.
