Ever since Netflix first ventured outside the United States to enter the Canadian market in 2010, the company has made huge strides in bringing its services to a global audience. Earlier this year, Netflix added 130 countries to the already long list of countries where Netflix streaming is available.
But global ambition comes at a price: while Netflix has been operating profitably in the United States for quite some time, the company is losing money outside of its home turf. According to calculations by our Digital Market Outlook analyst team, Netflix took a monthly loss of $0.60 per international subscriber in the past quarter, while U.S. subscribers generated $2.90 in operating profit per month.
This is due to several factors adversely affecting international results: first of all the average revenue per international user is lower than it is in the United States because prices differ across different regions. Secondly, the cost of revenue, consisting mainly of costs related to the production and licensing of content, is significantly higher on a per user basis than it is in the United States. And thirdly, entering new markets requires significant marketing expenses.
To operate profitably outside of its home turf, Netflix simply needs more subscribers to carry the load of content and marketing costs that will otherwise continue to weigh on the company’s bottom line. To find out more about the global video streaming market, download our complimentary Video-On-Demand Outlook.
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