Netflix to expand service in 4 Nordic countries (Update)

Aug 15, 2012 by MICHAEL LIEDTKE

(AP) — Netflix's Internet video service will debut in four Nordic countries before the end of the year, the latest step in an international expansion that has been crimping the company's financial results and stock price.

Wednesday's announcement that Netflix is coming to Norway, Denmark, Sweden and Finland answers a question left hanging since April, when the company said it would enter another European market, without saying where.

The new market includes the setting for one of Netflix's original online video series, "Lillyhammer," which revolves around a New York mobster who moves to Norway.

Netflix Inc. began streaming movies and TV shows over the Internet in the United Kingdom and Ireland in January. Earlier, it had expanded to Canada and dozens of Latin American countries. The company got its start renting DVDs through the mail in the U.S. during the late 1990s before adding Internet video streaming in 2007.

Although Netflix has been able to eke out a modest profit in Canada, its service outside the U.S. so far has been a financial albatross. The company's international operations lost $192 million during the first half of this year.

Netflix has been drawing upon the success of its long-established DVD and Internet video services in the U.S. to pay for the international expansion.

Those costs, coupled with rising fees to license Internet video in the U.S., have taken a heavy toll on the company. Netflix's earned just $1.6 million during the first six months of the year, a 99 percent drop from net income of $128 million at the same time last year.

The company, which is based in Los Gatos, California, expects to make money in the current quarter ending in September, but it already has warned that the push into another international market will likely result in another loss during the final three months of the year. Depending on the size of the fourth-quarter setback, Netflix could wind up with its first annual loss in a decade.

The rising costs have caused many investors to sour on the company's stock, which has been slumping since Netflix infuriated hordes of its U.S. subscribers by raising its prices by as much as 60 percent last year.

Netflix also has been facing more competition. Comcast Corp., for instance, offers a less expensive streaming service called Xfinity Streampix, while Verizon Communications Inc. and Coinstar Inc. are jointly creating one to bundle with DVD rental kiosks operated by Coinstar's Redbox division. Other competitors include Hulu.com and Amazon.com Inc. Netflix is hoping it can stay competitive by having a wider selection of movies and TV shows than its rivals.

Netflix CEO Reed Hastings is absorbing some short-term pain in a bid to establish his company as the leader in online video as high-speed Internet connections become more accessible and affordable around the world. After ending June with 3.6 million international subscribers, Netflix hopes to add about 500,000 more customers in the U.S. during the current quarter. Netflix ended June with 26.4 million unique U.S. subscribers.

The Internet video service costs $8 per month in the U.S. and is priced in the same range internationally. Netflix said it would reveal its prices in the four Nordic countries later this year.

Netflix shares added $1.14 to $62.90 in Wednesday's afternoon trading. That's well below the stock's all-time high of nearly $305 reached about 13 months ago and left the shares down by about 9 percent so far this year.

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