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80% of Netflix Subscribers can be Upsold, as Tiers and International Expansion Become Key to Continued Growth

Netflix Subscriber Market Analysis and Commentary

17 Jul 2015 - Netflix's impressive recent quarterly results pointed to continued subscriber growth, driven in particular by further international expansion. In addition, Netflix spoke of its desire to move consumers up to higher pricing tiers. Analysis from Futuresource Consulting points in more detail to some of the drivers of future growth.

International growth impresses, with Netflix reporting that almost 2.4 million total international subscribers were added in Q2, which means international subscribers are now over half those in the USA. Futuresource's Video Insights research programme, which provides detailed insight into the development of the video and TV markets in 21 countries worldwide, shows that Canada and the UK lead the international markets with around 4.5 million subscribers each. Q2 growth was also significantly boosted by the launch of its service in Australia at the end of March, with Futuresource estimating subscribers approaching 1 million by the end of Q2.

David Sidebottom, Principal Analyst for Entertainment Content at Futuresource Consulting, says "international growth will be crucial for the mid to long term success of Netflix, continued expansion into countries such as Italy, Spain, China, Japan and India will give the company true global reach. However, as Netflix alluded to on its investor call, many new market launches moving forwards are unlikely to see instant results compared to other countries. Launches in September 2014 in Germany and France have been more difficult than countries such as the Netherlands and Australia, largely due to local culture and attitudes to subscription services and international content in general. China and Japan are likely to be Netflix's most challenging launches yet, although clearly it has lowered its expectations to play a long game in these markets." 

Key to any subscription service is Average Revenue Per User (ARPU) growth, something Netflix has achieved through price tiering and marginal price increases. Futuresource's recent consumer survey, Living with Digital, suggests there is plenty of room to help achieve Netflix's ambition of moving customers up the tiers.

"Over one third of subscribers in many of the leading countries are still on the basic, one stream Netflix plan, according to our Living with Digital consumer survey, in some countries this is over 40%" says Sidebottom. "In particular, there is significant potential to move subscribers to the most expensive 4-stream family plan, with the added benefit of 4K streaming, with typically less than 20% taking this option. However, in developed Netflix markets like the USA, UK and Canada, over 10% of consumers don't know what plan they are on, making an upsell more difficult."

Sidebottom added "Netflix has the option to also tier prices based on content availability, similar to Pay-TV operators, which to date it has been reluctant to do. However, as its content purchasing power increases, it may decide to tier further, particularly if it makes a foray into more specialist content or even Sports." 


Futuresource Consulting is a specialist research and knowledge-based consulting company, providing organisations with insight into consumer electronics, digital imaging, entertainment media, broadcast, storage media, education technology and IT. With a heritage stretching back to the 1980s, the company delivers in-depth analysis and forecasts on a global scale, advising on strategic positioning, market trends, competitive forces and technological developments. 

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