Netflix expands European presence, signs exclusive content deal with Vodafone UK

Netflix announced its widely anticipated expansion into more European markets this week, in a move that will provide further competition to existing pay-TV providers across the Continent.

The U.S.-based TV streaming specialist said it will offer "a wide-range of entertainment for a low monthly price" in Germany, Austria, Switzerland, France, Belgium and Luxembourg later this year. Anyone interested in becoming a member can sign up to receive an email when Netflix has launched.

The company is already present in the UK, Ireland, Sweden, Norway, Denmark, Finland and Netherlands. By the end of the first quarter of 2014 it reported 12.7 million international members, 11.75 million of which are paying subscribers.

As Netflix announced its European expansion, Vodafone UK also unveiled an exclusive deal with the U.S. company that will see subscribers to the mobile operator's LTE plans receive free Netflix services for a promotional period of six months.

"The promotional offer of six months Netflix with Vodafone Red 4G price plans will be available in-store, online and by phone from July," the company said in a statement. The content is included in plans costing from £26 (€32/$44) a month.

Vodafone is not providing details of the commercial arrangements with Netflix, and said it is also not yet able to confirm what will happen once the six-month promotional period expires. Netflix currently offers its services to UK consumers for a monthly subscription of £5.99, with a month's free trial.

Inclusive content deals such as these have proved increasingly popular among mobile operators as they seek to showcase the capabilities of their LTE networks, and video is regarded as one of the best ways to show users the benefits of upgrading to LTE. Vodafone UK already includes Spotify music and Sky Sports packages in its Vodafone Red 4G plans.

As Vodafone has not revealed the commercial arrangements with Netflix, Emma Mohr-McClune, service director, global consumer services, at Current Analysis, noted that it is too early to jump to conclusions around zero-rating and issues relating to net neutrality, for example: "This offer won't be available until July, and we'll have to wait until then to fully understand how Vodafone UK intends to position a limited-period Netflix promotion as part of the Vodafone Red package," she said.

In a simple bundle model, Mohr-McClune explained, a carrier subsidises the monthly subscription of an OTT content service, such as Netflix, to provide a value-added service it can be reasonably certain it can monetise by other means. "In business model terms, the investment can be justified. As carriers worldwide start to question the business justification of subsidising mobile devices, there's more push to subsidise other powerful incentives, such as content," she commented.

Mohr-McClune further noted that Vodafone UK links recent moderate success in positioning third-party content entertainment with the purchase of LTE plans with larger data buckets. "In the most recent quarterly report, CEO Vittorio Colao talked about Europe moving to a more 'U.S.-style' model, in which the volume of data plays a higher purchasing influence," she said.

Vodafone's recent full-year results show that the operator still has some work to do to monetise its LTE and data subscriber base, after revenue and EBITDA continued to decline in its key European markets.

For more:
- see this Netflix release
- see this Vodafone release

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