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Netflix to complete global expansion in two years

Reed HastingsNetflix has said it plans to complete its global expansion, while staying profitable, over the next two years, outlining plans to up its footprint from 50 to 200 countries.

In a letter to shareholders to announce its fourth quarter 2014 results, Netflix said that it plans to launch in Australia and New Zealand in late Q1 2015 and will launch in “additional major countries” later this year.

The SVOD provider said that it intends to stick to its “core ad-free subscription model,” though admitted it is still exploring its options in China where it aims to operate a small service based around its original and other globally licensed content – if it can acquire the necessary permissions.

“Our international expansion strategy over the last few years has been to expand as fast as we can while staying profitable on a global basis,” said Netflix CEO Reed Hastings and CFO David Wells in Netflix’s shareholder letter.

“Progress has been so strong that we now believe we can complete our global expansion over the next two years, while staying profitable, which is earlier than we expected. We then intend to generate material global profits from 2017 onwards.

“We already offer Netflix in about 50 countries and have learned a great deal about the content people prefer, the marketing they respond to and how to best organise ourselves for steady improvement. Acceleration to 200 countries is largely made possible by the tremendous growth of the internet in general, including on phones, tablets and smart TVs.”

The comments come after Netflix’s chief content officer Ted Sarandos told attendees at investment bank UBS’s global media and communications conference last month that Netflix would love to see the product available “everywhere in the world” within five years.

Announcing its Q4 results, Netflix said that it has a total 57.4 million members after adding a record 13 million new members in 2014. This breaks down to 39.1 million US customers and 18.3 international customers. By the end of the current quarter, Netflix said it expects to have 61.4 million global members.

Discussing its content plans, the SVOD service said that it will continue to grow the percentage of its content spend on originals for “several years” to come.

It also said it would offer controversial comedy The Interview in the US and Canada from January 24 – just a month after Sony Pictures Entertainment made it available online on a pay-per view basis after pulling its widespread theatrical release in the wake of the Sony hacking scandal.

Overall, Netflix reported Q4 revenues of US$1.48 billion, compared to US$1.18 billion in the same quarter last year. Operating income was US$65 million, down from US$82 million last year, while net income was US$83 million – also down from US$48 million last year.