Thanks To International Reach, Netflix On Track To Exceed 100 Million Subscribers By 2018

Netflix, Inc. (NASDAQ: NFLX) is poised surpass the 100 million-subscriber mark by 2018, as international subscribers are expected overtake the U.S. domestic subscribers over the next two years, according to a new analysis from Markit Ltd (NASDAQ: INFO).

Current Situation

The total number of Netflix subscribers grew 30 percent between 2014 and 2015 and is forecast to grow 21 percent in 2016 as territorial expansion reaches its peak, according to the research.

Currently, Netflix has total paying subscribers of 79.9 million, and by 2020, Netflix will have 75 million international subscribers. Markit expects Netflix International paying subscribers to grow 38 percent in 2016, with more than 2.8 million of these new paying subscribers coming from new markets Netflix launched service in at the beginning of this year.

Expectations For The Future

According to the report, by 2020, Netflix global revenues are expected to reach $13 billion, with international accounting for 53 percent of those sales. Domestic streaming revenues are expected to hit $6.2 billion by 2020, and international revenues to reach $7 billion.

At the end of 2016, Western Europe — with strong U.K. (over 6 million subscribers by the end of 2016), Netherlands and Nordic (5.4 million subscribers combined) markets — will be the leading region for Netflix outside the domestic U.S. subscriber base, the report said.

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Germany, despite strong competition from Amazon Prime and free TV, is expected to reach 2.2 million paying subscribers by the end of 2020.

In addition, the "soon to be localized" markets of Poland and Turkey will boost uptake in the Central Europe region. However, the research firm said the effect of the localization will not be felt immediately.

"With the worldwide launch, Netflix has launched a platform upon which it can build and differentiate the service to fit specifics of every region in the future," Irina Kornilova, senior analyst at IHS Technology (Markit) said in a statement.

"Netflix is starting this localization process in Poland and Turkey this year. Subscribers in these countries can expect an addition of local languages to the user interface, subtitles and dubbing of content. This will help drive new subscriber numbers dramatically," Kornilova added.

Netflix is expected to continue with its localization strategy through 2017 and 2018. As a result, the new territories are forecast to grow paying membership base by 133 percent and 62 percent in 2017 and 2018, respectively.

Markit noted that, by 2020, subscribers in countries rolled out in 2016 will represent a quarter of all international subscribers, reaching 19 million.

Shares of Netflix closed Monday's regular trading session at $95.26.

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