Roll-out ‘to hit Netflix profits’

US video-on-demand giant Netflix has warned its aggressive international expansion strategy will damage its third-quarter results, despite global subscriber numbers surging past 50 million and profits doubling.

The California-based streamer posted revenue of US$1.15bn, compared with US$837m in the same period last year (March-June), while its net income hit US$71m, up from US$29m.

Netflix also added 1.69 million users in the same period, thanks largely to original series like Orange is the New Black and House of Cards.

It means the company now has 50 million users in more than 40 countries.

Netflix added 570,000 domestic streaming customers in the quarter, lifting its US total to 36.2 million. Meanwhile, its international customer base rose by 1.12 million to 13.8 million.

But the firm cautioned that its Q3 earnings would be hit by higher expenses in Europe, predicting the ‘contribution loss’ from international streaming would rise from US$15m in Q2 to US$42m in Q3.

Netflix said this week that its previously announced plans to roll out in six new European countries, including France, Germany and Austria, will launch in September. The company’s international markets already include parts of Europe, including the UK, and Latin America.

But it is expected that Netflix will have to spend huge amounts to compete in new territories such as Germany, where Amazon, ProSiebenSat.1’s Maxdome and Vivendi-owned Watchever already have a strong hold on the market.

The firm will also continue to invest in large-scale original projects such as forthcoming UK royal family drama The Crown, which is expected to cost £100m (US$170m).

Shares in Netflix, which are already up 22% for the year, rose nearly 2% in trading after US stock markets had closed.

In the US, Netflix is continuing to fight internet service providers such as Verizon over who must pay for the increasing pressure that streaming video puts on download speeds.

In related news, Netflix is continuing to seek its first UK- and Ireland-based ‘tagger,’ who will be responsible for watching and analysing films and series streamed on the platform so that it can improve its recommendation system.