Will Netflix Overcome Its Challenges from Fiscal 1Q16?
Netflix’s international streaming business
Netflix (NFLX) increased its presence in another 130 countries in fiscal 1Q16. Netflix had international streaming revenues of $652 million in fiscal 1Q16, an increase of 57% year-over-year. This increase in revenue includes the negative impact of the rising dollar at ~$82 million year-over-year.
Netflix had a contribution loss of $104 million from its international market in fiscal 1Q16, which was better than its expected internal forecast of $114 million. Netflix continues to expect a sequential improvement in its contribution losses in Q2 as the rise in the dollar tapers down. In the past three months, the PowerShares DB US Dollar Index Bullish (UUP)—which tracks the US dollar—has fallen around 4.7%.
As the chart above shows, Netflix had international streaming memberships of 34.5 million in fiscal 1Q16 with net additions of 4.5 million. Currently, 42% of Netflix’s total streaming members are from international markets.
Netflix’s plans to boost its international streaming business
Netflix’s viewers can pay for Netflix subscriptions through gift cards or prepaid cards in countries or territories where there’s no credit or debit access. Netflix also partnered with Apple’s (AAPL) iTunes in Latin America and Alphabet’s (GOOG) Android devices to facilitate payments for Netflix subscriptions.
Netflix had stated earlier that it’s “primarily targeting outward‐looking, affluent consumers with international credit cards and smartphones” for its user base in international markets. It also expects that these users will be familiar with Netflix’s English-language content.
Netflix has also “stepped up production of non-English language series,” boosted by the success of Narcos. In India (EPI), it has started with a mix of English-language content and very few Hindi movies. In new geographical territories, Netflix intends to build up its content gradually.
Netflix continues to keep its international pricing closer to its US prices. Netflix’s streaming service in international markets costs from $6 to $19 per month.
Netflix makes up 0.26% of the SPDR S&P 500 ETF (SPY), which has a 3.9% exposure to the computers sector.
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