For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment
Netflix CFO Barry McCarthy used carefully guarded language when he
announced that the US video rental-by-post and VOD supplier plans to expand
overseas without saying exactly where.
His words may have sent a shiver through boardrooms around the
world, not least in the North Acton offices of Lovefilm. Whether the reaction
is one of fear or anticipation depends on your position in the market. The
Netflix presentation at a San Francisco conference could signal the emergence
of a powerful new player in Europe with the financial muscle to negotiate
global deals with the Hollywood studios.
Netflix was among the first to realise that games consoles offer a
gateway to expansion in the online entertainment market and McCarthy described
the Xbox 360 as “a phenomenal contributor to growth” since autumn 2008.
PlayStation 3 delivery arrived in November this year, and strong rumours that
the Nintendo platform will be next were all but confirmed by McCarthy when he
said, “We would rather have Netflix on all games consoles, rather than none”.
McCarthy said Wall Street underestimated the potential of
streaming to games consoles and now he is leading the drive toward Netflix on
internet TVs, which are forecast to command a substantial slice of the market
by this time next year.
This clear vision of where business might be found in the future
is what has allowed Netflix to reach more than 11 million subscribers and
swallow lesser operations to become dominant in the US.
Speaking of the company’s plans for international expansion,
McCarthy said, “We will not pick the largest of the available markets in order
to run our experiments.” That appears to specifically exclude the UK for the
moment but he added, “There is no reason to tell our competitors where we are
going; it will become clear soon enough where we are headed.”
Lovefilm has been parading its attractions before a succession of
potential suitors for some time now. When he announced the 2008 deal under
which Amazon acquired 30% of the company, CEO Simon Calver said that plans to
float or buy out the business were “more firmly on the table than before”. In
June of this year, rumours appeared in the Financial Times of discussions with
a potential majority shareholder. They remain unconfirmed, but a buy-out of
Lovefilm must remain an option on the Netflix boardroom table.
Some commentators have read between McCarthy’s lines to predict
either Australia or Germany as the base for the international Netflix
“experiment” followed by an acquisition in the UK. Lovefilm may be waiting at
the altar when that moment arrives.
We learned last week that the UK has Europe’s most active online
shopping community, with two-thirds of the adult community reporting that they
purchased goods on the web in the past 12 months. Over half of those surveyed
said that they bought travel and accommodation over the internet, while films
and music accounted for a third of online purchases. Across all the EU
countries surveyed, more people reported buying books and magazines online than
packaged media.
Surprisingly, perhaps, although the UK leads the way in
e-commerce, consumers in Ireland figure among the least active internet
shoppers in Western Europe, despite having comparable broadband connections.
Just 58% of Irish 16-to-24 year olds said they use the Internet every day,
compared to 83% in the UK.
The report, which was compiled by the European Commission
statistics organisation Eurostat, draws attention to the fact that cross-border
internet shopping is still just 6% of the market. An undercover shopping survey
run by the European Commission earlier this year found that many retailers
refuse to ship products to key countries within the EU, which was described as
“a barrier to trade”. A digital single market for online commerce was proposed
in November and given the current price advantage that the pound/euro exchange
rate confers on the UK it there would seem to be an opportunity for UK
e-tailers across the Irish Sea.
Nokia announced on Thursday that four of its flagship stores,
including the Regent Street outlet in London, are to be closed. The Regent
Street outlet was reported to have cost the company £4 million when it opened
in October 2007. The company explained the closures in a statement that was a
masterpiece of its kind:
“Nokia is crystallising its branded retail strategy with an aim to
improve the operational efficiency of its retail network and further optimise
its retail approach according to various market and channel developments in the
past few years, as well as ensuring that we have a workable model that is
appropriately in-line with the strategy of each individual market. This has
resulted in some re-organisation of our retail network and, as a consequence,
Nokia intends to close its retail stores in London, Sao Paulo, Chicago, and New
York.”
Well, at least that announcement is clear.
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