Netflix Inc. added a better than expected $3.28 million streaming subscribers in the June quarter, as the video service continued to sacrifice profit for an ambitious international expansion.
The Los Gatos- based company is planning to expand its services aggressively to more countries by the end of next year, with Japan, Portugal, Italy and Spain listed to join later this year.
Also, Netflix is looking for a partner to to team up with in penetrating the Chinese market. The company by the end of 2016 hopes to reach China, where it said it was “continuing to explore options”, reports Reuters.
The second quarter results of Netflix however, reveal the risks associated with expanding business globally. The company’s profit fell by 63% in the quarter as costs increased to buy and create content, and the strong U.S. dollar lowered the value of revenue generated outside the U.S.
Netflix Chief Executive, Reed Hastings has declared that it will be difficult to tame the international market right out of the gate, thereby striking a cautious note for investors. He said, “How we do in the first year in a new market is not that determinate of the long-term.” In the next couple of years, Netflix will “have a clearer picture of how we will do in markets that are quite different from the U.S.,” he added.
Netflix had negative free cash flow of $229 million in the second quarter, wider than the $163 million outflow in the first quarter, as the company continues to spend on original shows. Nevertheless, the service affirmed its commitment to the originals strategy, noting that nearly 90% of its subscribers have “engaged” with its original shows and movies.