Strong growth sets the stage for Netflix’s next international expansions

Netflix announced Monday that it now has more than 40 million subscribers worldwide, compared to less than 30 million just a year ago. A significant part of that growth has been its international presence, which grew to a total of 9.2 million subscribers in the company’s Q3 2013, from just 4.3 million a year ago.

At the same time, Netflix managed to remain profitable, with a net income of $32 million and revenue of $1.1 billion, despite still investing heavily into its international markets. For the company, this means that it will now pursue additional markets in 2014.

International grows as fast as domestic

For the first time in its corporate history, Netflix added more international subscribers than domestic subscribers in Q3, to the tune of 1.44 million additional subscribers in Europe, Canada and Latin America. The company cautioned that its international numbers were a bit skewed by a wave of free sign-ups in Latin America during the quarter, but even the number of paid international additions was strong, with the addition of about one million paying customers in its international markets.

CEO Reed Hastings and CFO David Wells specifically made note of this strong international growth in their letter to shareholders Monday, saying:

“Our success this year in increasing international net additions to nearly the level of our domestic net additions shows substantial momentum and confirms our belief there is a big international opportunity for Netflix.”

And on Monday’s earings call, Hastings got even more specific, saying that he’d expect Netflix to generate between 70 and 80 percent of its revenue in international markets in the future. That’s significant because Netflix has said in the past that it expects to have between 60 and 90 million customers in the U.S.. Based on those numbers, Netflix seems to hope that it will grow its international markets up to a total of 450 million subscribers.

More than one large additional market in 2014

At the same time, international hasn’t always been a clear-cut success story for Netflix. Its huge expansion into Latin America has particularly been seen as troubled, with subscriber rates coming in below expectations and billing posing a challenge.

This, and concerns about the cost of its international expansion, led the company to slow down on its plans abroad. In 2013, Netflix only set up shop in the comparably small Netherlands, after taking on multiple international opportunities per year during previous years.

There are signs that Netflix may now be ready to once again to launch in new markets to further international growth. In their letter to investors, Hastings and Wells said Monday that the company plans to launch in “new markets” in 2014, and during their Q3 earnings call, Hastings said: “When we look forward next year, we definitely will be looking at some larger expansions.”

So where will Netflix go next?

Netflix stopped breaking out numbers for specific markets some time ago, and Monday it just said that it is growing in all of its markets. The company has in the past given some clues through job offers, with a job offer posted earlier this year looking for translators proficient in “Turkish, Dutch, Hindi, French, and Korean.” Shortly thereafter Netflix went live in the Netherlands.

Does this mean that Korea or France are next? Wells kept the cards close to his vest on Monday’s earnings call, simply saying that “we don’t have a new launch country (to announce).”