Netflix: 'Skinny Launches' Will Dampen Global Expansion

The international segment expansion was still tracking ahead of expectations on the subscriber side, with 29.7 million paid streaming subscribers at the end of the quarter, up from 26.0 million last quarter and 18.4 million a year ago. However, the low guidance of 2 million net adds for the second quarter, well below our previous projection of 4 million, points to a slowdown in the expansion, one quarter after the immediate launch into an additional 130 countries last quarter. However, most of the newly launched countries received a skinny launch package with a limited library consisting of Netflix originals and acquired global rights English-language programming. This package will only appeal to a thin slice of consumers in many of these new markets, primarily English-speakers with the disposable income to pay $7.50 to $8.00 per month and access to an international credit card. This narrow appeal may limit the international expansion until the company rolls out more country-specific content.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.