Netflix Braves Cultural Barriers for European Expansion

Netflix is tackling significant language and cultural barriers for the first time as it seeks to become a true global player. This week's rollout in France, Germany, Austria, Switzerland, Belgium and Luxembourg presents the first major test, in the form of significant language and cultural barriers. In the last two years, the streaming service has been a hit in the U.K., the Netherlands and the Nordic countries, where English is widely spoken, and U.S. films and TV have long been part of everyday life. But the latest round of European markets – particularly France and Germany – are likely to resist U.S. cultural hegemony. (In the U.K., research firm BARB estimates Netflix has three million subscribers, more than one in ten households, and twice as many as a year ago.) In Germany, according to Christof Baron, joint CEO of Mindshare Europe, Middle East and Africa and chairman of Mindshare Germany, Netflix faces potentially its toughest challenge, because the country has 60 to 70 good-quality free TV channels. There are also streaming rivals including Maxdome and Watchever (part of Vivendi) to battle. However, Mr. Baron believes that there is a gap in the market for the sort of high-end drama and comedy that Netflix does well. Dominique Delport, global managing director of Havas Media Group and its chairman in France and the U.K., agreed that there are extra cultural issues in Germany. He said, "Anglo Saxon content is less attractive to the German market: "House of Cards: Season 2" [broadcast on free-to-air TV] attracted less than 100,000 viewers per episode." Germans also prefer more expensive dubbing on Englis-language shows, while the French are happy with subtitles, he said. A Netflix spokesman said there are no plans to create German-language programming, but in France, a new French-language series, "Marseille," signals Netflix's willingness to embrace European culture. In France, Netflix's main rivals are FilmoTV and CanalPlay (part of broadcaster Canal+), which already owns the French rights to one of Netflix's flagship shows, "Orange is the New Black." There is also the "cultural exception" law to be negotiated, which requires broadcasters to produce 40% of their content locally and to pay extra taxes to fund the French TV and film industry. Netflix is claiming exemption because its European headquarters is outside France (currently in Luxembourg, with a move to the Netherlands next year). As in many countries, Netflix Europe has bought up some pretty old content to bulk out its "hero" shows like "Game of Thrones" and "Orange is the New Black". "Netflix has a clear strategy -- they start with a limited offer which doesn't cost them very much money and minimizes the risk," Mr. Baron said. "Then they collect very detailed data about what people like, and structure programming and investment around consumer behavior." This long-term approach means Netflix has a good chance of succeeding in the end. "It will take them time," Mr. Baron said. "Netflix's global brand gives it a lot of power when making deals with production companies, which will help them win the game internationally. And, like Amazon, they are prepared to accept lower profits for a while, to fund expansion." Jean-Paul Edwards, OMD's head of product innovation for Europe, Middle East and Africa, believes that the cultural hurdles could be a catalyst for creativity. He pointed out that Netflix's first co-production, "Lilyhammer" (made a year before "House of Cards") was created with Norwegian broadcaster NRK and features characters speaking in both English and Norwegian. "I think there will be more of these strange, multi-language hybrids," Mr. Edwards said. "There will be lots of innovation to get round the issues." Mr. Edwards added, "Netflix's U.K. launch two years ago was well-timed. The country had fast enough connection, and Netflix had high quality content. From a technical perspective the window is wide open in the rest of Europe, too. The barriers are essentially gone – success will be defined by content and rights and understanding the nuances between different local markets."

Netflix Braves Cultural Barriers for European Expansion

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