The Netflix tightrope

1 May 2012

Netflix resumed strong growth in domestic US streaming subscriptions in Q1 2012, but weak Q2 guidance and high churn reinforce doubts about long term profit growth in an increasingly competitive market. Netflix has embarked on a global expansion strategy in the belief that achievement of global scale will improve its bargaining power, but the rationale is questionable and the prospects of incremental profits at best long term. The Netflix UK and Ireland streaming launch in January 2012 exceeded expectations; however, the importance of the US and interlocking of established content creation and TV distribution interests underscore the challenge facing Netflix and the thinness of the line between success and failure.

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