The number of international Netflix subscribers will overtake the number of domestic subscribers in the U.S. by 2018, according to a report released today by London-based market research firm IHS Markit.
Netflix reported 79.9 million paying subscribers in Q2 2016, 46 million of which came from the U.S., with the remaining 33.9 million scattered across the balance of the 190 countries the service is available in around the globe. IHS projects that, by 2020, Netflix’s number of international subscribers will have ballooned to 75 million.
Subscriber growth has been key to Netflix’s stock value. In April, the streaming giant forecast that it would add 500K new streaming subscribers in the U.S. in Q2 2016, down 900K year-over-year from Q2 2015, and 2 million internationally, down 2.37 million from the same period last year. But when it released its Q2 earnings report in July, Netflix reported 160K net subscriber additions in the U.S. and 1.52 million internationally in Q2, falling well below the modest gains it projected. In the wake of the announcement, the company’s stock price dropped 15.8% in after-hours trading.
Netflix has made international expansion a priority, not only bringing the service to scores of new territories, but also commissioning locally-produced content, including the series “Sacred Games” (India),“Enda” (Argentina), “3%” (Brazil) and “Marseille” (France), as well as an untitled show from Madrid-based Bambú Producciones.
According to IHS, Netflix’s total number of subscribers will grow by 21 percent in 2016, buoyed by a 38 percent increase in international subscribers, with more than 2.8 million of the new subscribers coming from the 130 new markets Netflix launched in at the beginning of this year. It projects Netflix global revenues will reach $13 billion by 2020, with 53 percent ($7 billion) coming from its international markets and 47% ($6.2 billion) from the U.S.
The most fruitful international territory for Netflix has been Western Europe. Its two biggest markets outside of the U.S. are the U.K. and the Netherlands and Nordic territories, which will have 6 million and 5.4 million subscribers, respectively, by the end of 2016, according to ISH. Germany, where Netflix faces competition from Amazon Prime, is expected to reach 2.2 million paying Netflix subscribers by the end of 2020.
“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,” said Irina Kornilova, senior analyst at IHS Technology, 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.”