Netflix, Inc. (NASDAQ:NFLX) may come up against a giant hurdle as it prepares to launch its streaming video service in several European countries in the coming weeks. As reported by Bloomberg this morning, European networks may be unable to cope with the swell in data demand that the Netflix, Inc. (NASDAQ:NFLX) service will bring.
“Our networks could be forced to their knees,” Deloitte LLP’s head of media, Klaus Boehm, was quoted as saying from the IFA Electronics show in Berlin today.
Netflix, Inc. (NASDAQ:NFLX) is scheduled to launch in six mainland European countries this month, including Germany (currently Europe’s financial capital and its leading video content market), France, Switzerland, and Belgium. They will join a list of European countries which already includes the U.K, Sweden, and the Netherlands.
Estimates vary widely as to the number of subscribers Netflix, Inc. (NASDAQ:NFLX) will land in Europe, and the possible resultant repercussions that may have on networks. Both IHS and JP Morgan expect Netflix, Inc. (NASDAQ:NFLX) to add at least 5 million new subscribers in addition to the 1.1 million in Europe already, by the end of 2014, with IHS predicting as many as 6 million. IHS has further predicted 8 million new subscribers by the end of 2018.
Wedbush Securities on the other hand is somewhat bearish on their European expansion, predicting just over 4 million subscribers by the end of the year, including their existing ones, meaning only 3 million new subscribers, half the amount predicted by IHS.
Netflix, Inc. (NASDAQ:NFLX) is doing all they can in preparation of their European expansion, having recently completed a massive data delivery center in Paris capable of providing one terabit per second of data delivery. However, the networks themselves also need upgrades, and often look to content providers like Netflix, Inc. (NASDAQ:NFLX) to shoulder some of the financial burden for necessary upgrades on their networks, and the demands placed on them. In the U.S, Netflix, Inc. (NASDAQ:NFLX) has had to strike deals with multiple telecommunications providers to ensure adequate delivery speeds of its service to customers.