Netflix announces huge global expansion, adding 130 more countries to its service

Streaming services giant Netflix took a big step Wednesday to expand its global footprint, sending the company's share price soaring.

Against the backdrop of the Consumer Electronics Show in Las Vegas, Netflix Chief Executive Reed Hastings announced the Los Gatos, Calif., company had added 130 more countries to its service.

That marks a substantial increase in the size of Netflix's global network, which previously spanned 60 countries in North America, Latin America, Europe, and in the Pacific. Now, Netflix has services in more than 190 countries, including Russia, India, South Korea and Saudi Arabia.

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"When we started Netflix nearly 20 years ago, we dreamed of the day when the Internet would enable us to deliver TV shows and movies to the billions of people with whom we share the planet," Hastings told the crowd during his keynote address. "Today, right now, you are witnessing the birth of a global TV network."

Netflix also said that it was including Arabic, Korean and Chinese to the 17 other languages already available.

As in the U.S., consumers in the newly added countries who pay a monthly fee will be able to watch Netflix original series as well a library of movies and TV shows.

Netflix said it will release 31 new and returning series in 2016, in addition to 24 films and documentaries, and 30 original children's series and a range of stand-up comedy specials. This week Netflix announced an expansion of its partnership with Glendale studio DreamWorks Animation.

"With this launch, consumers around the world — from Singapore to St. Petersburg, from San Francisco to Sao Paulo — will be able to enjoy TV shows and movies simultaneously — no more waiting," Hastings said.

Although investors were expecting Netflix to expand its network, the size of the expansion came as a pleasant surprise to many on Wall Street who had fretted over a slowdown in Netflix's domestic business.

Netflix Inc. shares climbed $10.02, or 9.3%, to $117.68 on Wednesday.

"The shift of power in media consumption has gone from corporations and their advertisers to the user through Netflix and the Internet," wrote Brian Fitzgerald, a media analyst with Jeffries.

For Netflix, the expansion is driven by a desire to tap into a vast market for Internet television and a growing appetite among consumers to watch TV shows whenever they want, without commercials. Hastings noted that there were 3.2 billion people online in 2015, up from 400 million in 2000.

In an interview with The Times on Wednesday, Netflix Chief Content Officer Ted Sarandos said Netflix was entering a new phase.

"The whole idea of near-global penetration of this service and delivering the news cloaked in secrecy at CES, it's pretty astonishing," Sarandos said. "The real work starts now of creating a really great global service with Netflix ... becoming more localized with additional languages, having additional payment options and increasing the local content in some of the territories. All that work is what's ahead of us starting today."

After finding success in the U.S. with its DVD-by-mail business and now its streaming service, Netflix has increasingly turned overseas for growth opportunities. Last year, Netflix rolled out its services in Japan, Australia and Spain, among others. One country that remains out of reach is China, where Netflix faces competition from local streaming services and potential censorship issues. But Sarandos expressed optimism that Netflix would eventually crack the world's second-largest film market.

"China, we'll figure out," Sarandos said. "It's a very dynamic situation for foreign media companies and foreign media ownership in China. We've been at it, and we'll continue to work at it. The one thing I think will excite China about Netflix is it gives them the opportunity to have their stories told around the world."

Netflix also won't be available in Crimea, North Korea and Syria because of "U.S. government restrictions on American companies."

Netflix subscribers watched 12 billion hours of content globally over the last three months of 2015, an increase of 45% over the same period in 2014, Hastings said.

Netflix closed out its third quarter last year with 69.2 million streaming subscribers in more than 40 countries, including 26 million outside the U.S.

But the company has drawn more scrutiny from investors in recent months because of slower-than-expected subscriber growth in the U.S. The slowdown is expected to be reflected in the company's fourth-quarter results, which will be released this month.

Netflix shares dropped Monday after a downgrade from Robert W. Baird, which lowered its price target to $115.

"At some point, you get big, and the growth slows, but you still continue to grow," Sarandos said of Wall Street reaction this week. "That's just an organic thing that will happen to any service in any business. We look at the U.S. business as healthy and growing. Will it grow as fast as it did in the early days? The second 50 million is a lot tougher than the first 50 million."

Copyright © 2016, Los Angeles Times
A version of this article appeared in print on January 07, 2016, in the Business section of the Los Angeles Times with the headline "Netflix shares soar as network swells - The streaming service adds 130 countries to the existing 60, sending its stock up." — Today's paperToday's paper | Subscribe