In the FT, Alex Barker reports that Netflix is generating rapid subscriber growth outside the U.S. by accepting lower revenue per user in foreign markets. Barker writes:
More than a quarter of the California-based company’s revenues were generated in Europe, Middle East and Africa in the first three quarters of 2019, according to the numbers released on Monday.
The subscriber base has grown by 25 per cent in the first three quarters of 2019 alone. But the average revenue raised for each of the 47.4m users stood at $10.26, compared with $12.36 in the US and Canada, where Netflix has been more aggressive in pricing.
The differences are even more stark in Latin America, the company’s first international market outside the US. Subscriptions have almost doubled to 29.4m since the first quarter of 2017. But revenues per user stand at roughly $8.21, increasing by a modest 10 per cent since the first quarter of 2017 against a 25 per cent rise in the US over the same period.
Netflix’s disclosure indicates that the gap with US revenues per user is partly reduced when foreign exchange movements are taken into account, particularly in Latin America.
Asia is a smaller but faster-growing market for the subscription streaming service. The number of paying customers has increased 210 per cent since the first quarter of 2017, rising from 4.6m to 14.5m in the third quarter of 2019.
Average revenue per user is $9.31, which is higher than Latin America but lower than in Europe and the US. Some analysts expect Netflix’s decision to launch a $3 mobile-only subscription in India to weigh on per-user income.
The fast-paced growth in Netflix’s subscriber base has been a crucial part of its pitch to investors, who have driven up its share price in recent years. But sentiment began to cool on the company this summer after it lost US subscribers in the second quarter for the first time since 2011. Netflix shares are down about 15 per cent since July.
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