Net­flix hits the buf­fers as ex­plo­sive UK growth cools

Stream­ing ser­vice’s Bri­tish sub­scriber base plateaus with Dis­ney pulling plug on its films and TV shows

The Sunday Telegraph - Money & Business - - Business - By Christo­pher Wil­liams

THE ex­plo­sive growth of Net­flix in the UK is com­ing to an end, ac­cord­ing to data seen by The Sun­day Tele­graph.

The fig­ures raise new ques­tions over its busi­ness in the wake of Dis­ney’s de­ci­sion to take its films off the steaming ser­vice in the US.

Net­flix does not pub­lish UK sub­scriber num­bers, but a con­fi­den­tial anal­y­sis by a well-placed in­dus­try player shows that its rapid ex­pan­sion into Bri­tish homes may be reach­ing its lim­its. For most of last year the com­pany was stuck on around 5.7 mil­lion sub­scribers, ac­cord­ing to the fig­ures, which are partly based on in­for­ma­tion for the Broad­cast­ers’ Au­di­ence Re­search Board, a tele­vi­sion in­dus­try body. The data also in­cludes pri­vate con­sumer re­search.

Net­flix re­ceived a sea­sonal boost over Christ­mas, adding another 400,000 sub­scribers as its ac­claimed royal drama The Crown at­tracted new au­di­ences. It has since stag­nated again, how­ever, and has re­mained on around 6.1 mil­lion users this year.

The fig­ures rep­re­sent a sig­nif­i­cant slow­down. Af­ter its UK launch in 2012, Net­flix con­sis­tently added hun­dreds of thou­sands of new cus­tomers ev­ery quar­ter, ac­cord­ing to the data.

Signs it is “top­ping out” will add to pres­sure on the com­pany to find new sources of growth, with Ama­zon’s stream­ing ser­vice gain­ing ground.

One of the keys to Net­flix’s suc­cess in the UK was its deal with Vir­gin Me­dia to pro­vide its ser­vice via set-top boxes as part of a ca­ble bill.

It has not yet agreed such an ar­range­ment with Sky, which has more than twice as many pay-tv house­holds as Vir­gin Me­dia. It sees it­self as in more di­rect com­pe­ti­tion with Net­flix as a ma­jor maker and buyer of films and se­ries.

Sky is also un­der­stood to have de­manded con­trol over how Net­flix pro­grammes are pre­sented on its set­top box, which has been a ma­jor ob­sta­cle to a deal more re­cently.

The ten­sion echoes a long-run­ning row be­tween Sky and the BBC over the iplayer.

The cor­po­ra­tion in­sists on con­trol over its pro­gram­ming, while the paytv gi­ant wants to be able to mix it up with its own of­fer­ing and those of other broad­cast­ers to make rec­om­men­da­tions to view­ers.

Dis­ney’s de­ci­sion last week to with­draw its films and se­ries from Net­flix in the US and launch own-brand stream­ing ser­vices from 2019 sig­nalled a new re­la­tion­ship with the tra­di­tional paytv in­dus­try.

Stream­ing is ex­pected to take a grow­ing share of view­ing, and pro­duc­ers and dis­trib­u­tors are wary of hand­ing too much con­trol of the fu­ture to Net­flix and Ama­zon.

Dis­ney’s move knocked Net­flix shares by 4pc, although they trade at a price-to-earn­ings ra­tio of more than 200 on ex­pec­ta­tions of con­tin­ued strong growth.

Pay-tv’s push back against stream­ing is build­ing, how­ever. Two in­dus­try sources re­vealed that last year Vir­gin Me­dia was close to a deal to add Ama­zon’s stream­ing ser­vice to its sub­scrip­tion pack­ages, be­fore its par­ent com­pany Lib­erty Global stepped in to pull the plug. It is un­der­stood the paneuro­pean ca­ble gi­ant held fears about the long-term threat Ama­zon could pose to its pay-tv busi­ness.

Net­flix de­clined to com­ment on its slow­ing growth in the UK.

‘Anal­y­sis shows that Net­flix’s rapid ex­pan­sion into Bri­tish homes may be reach­ing its lim­its’

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