Another headache for Sky TV as Netflix goes global

Netflix CEO Reed Hastings used his keynote at the giant Consumer Electronics Show (CES) in Las Vegas to announce his company has gone global.

The streaming video on-demand service launched in 130 more countries today for a total of 190 (or almost everywhere bar a single digit number of nations).

That means another headache for Sky TV (not to mention Spark's Lightbox and Quickflix).

Why? When Netflix launched in Australia and New Zealand early last year, one off the company's visiting executives, speaking at a social event after the official launch, described controversy over geoblocks and country-specific content rights as "temporary sh*t."

At the moment, a content maker or distributor can make more money by selling exclusive rights to movies, TV series or sport country by country to the likes of Sky TV. 

The Netflix exec said his company wants enough customers worldwide that it can place global bids that trump what a content maker would get going country to country.

(I should add that forms one half of Netflix' strategy; the other is making more and more original series. Mr Hastings bragged at CES that with the service is doubling its original content in 2016, and that it would now take 25 days to watch every episode of shows in its stable. That's an impressive stat on one level, but not so much when you consider there are 365 days in a year. Netflix is still heavily reliant on buying rights to others' content.)

Netflix CEO Reed Hastings: his company's shares [NAS:NFLX] closed up 9.38% today, valuing his company at $US50.3 billion.

There is not an immediate threat to Sky (although shareholders will be keenly aware of it profit warning for 2016). It will take a while for Netflix to build subscribers in the countries where it has launched (at its last results, it reported 69 million paying subscribers from a year-ago 53 million). And Sky signed five-year deals to key sports, Disney and HBO content as Netflix launched in NZ. And although broadband is getting better all the time, liberating content from the scarce satellite capacity Sky used to monopolise so adroitly, it will take a while to be up to snuff for streaming everywhere. And Sky still has dibs on A-list sport, an area where Netflix has yet to show any interest (although threats lurk from sporting bodies splitting off online rights). And although Netflix wants to ultimately be a truly global TV channel, with the same content everywhere, the reality today is that it has a different line-up in different countries as it faces trench warfare over rights (Netflix ANZ, by one estimate, launched with around one-eighth the content of Netflix US.

English is not the dominant language in a lot of the countries Netflix launched in today, but that in part explains why the company has been so aggressive in pursuing captioning.

Netflix is likely to dip into the red in the short term as it pushes into new territories (last quarter it squeaked into the black -- thanks, ironically to its legacy DVD rental business – on revenue that climbed to $US1.58 billion from a year-ago $US1.22 billion. Its next quarterly result will arrive January 19). But its financial resources are huge and growing. In future Sky TV is going to have to bid more to keep rights to content — and streaming that content is a leaner/meaner/no-margin proposition compared to the decoder riches of yesteryear.

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