Tech

Shira Ovide is a Bloomberg Gadfly columnist covering technology. She previously was a reporter for the Wall Street Journal.

Netflix Can't Take Over the World

Netflix CEO Reed Hastings took a big risk in the last decade to shift the company from renting DVDs by mail to streaming video online. That bet helped build Netflix into a powerhouse that is reshaping the entertainment business. 

Now, Netflix is the middle of its next bet-the-company strategy to become a global television network. About 60 percent of Netflix's 75 million streaming subscribers are in the U.S.; the rest are abroad in places like the U.K and Scandinavia. The company wants to shift that mix to 50-50 over time. The international growth is paying off in the form of a 60 percent increase in net new international streaming subscribers in 2015.

While Netflix may be ready to rule the world, global domination won't be easy. 

Amazon and HBO have international ambitions for their Web video services, too, and local TV providers in Germany, France and elsewhere are creating counterweights to Netflix. The company's foreign forays aren't cheap, either. The company had negative cash flow from operations of nearly $750 million in 2015. Hastings has said meaningful profits are a year away. 

Investors have been more than willing to wait out Netflix's losses while it spends lavishly to expand its service to most corners of the globe. But the company is also dealing with troubles in its home market. Netflix is expected to add 1.75 million U.S. subscribers in the first quarter of 2016, which would be the smallest increase since 2012.

The risk is Netflix gets dragged down by its inability to keep growing at home and the hubris of its expansionist ambitions. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shira Ovide in New York at sovide@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net