Netflix Expands International Footprint With Paris Office

Netflix (NASDAQ:NFLX) recently opened a new office in Paris and plans to develop several new French shows in the coming years as well as several series and films developed by its production partners.

The company has already developed 24 French titles and will invest more than €100 million to develop more than 20 new French-language productions in 2020.

Upcoming productions include Big Bug, a comedy set in the future, and a series about gentleman-burglar Arsene Lupin, among others.

The decision to expand its French content portfolio comes after the French government’s announcement to force platforms like Netflix to invest at least 25% of their revenues earned in France to fund domestic content production.

Although this comes as a setback for the company and is likely to hurt its profitability in France, Netflix can leverage this to expand its presence in the country and become a major studio.

Strong International Content Portfolio Expected to Drive Growth

The original French-language productions will be a valuable addition to Netflix’s portfolio and are expected to drive the company’s top-line growth.

The company has been investing in diversifying its portfolio by developing several local language shows and movies, with some of them turning out to be huge hits.

Notably, the third season of La Casa De Papel was the most-watched show on Netflix across its non-English language territories. Moreover, while The Naked Director was a hit in Japan, the second season of Sacred Games was the company’s most-watched show in India.

However, increased spending on new content is expected to hurt cash flow generation, with the company estimated to have spent around $15 billion on total content in 2019.

Although fresh content will help in driving rapid subscriber growth, higher cash burn does not bode well for investors.

Expanding Presence to Strengthen Competitive Position

Netflix’s expanding presence in France coupled with its partnership with Vivendi (OTC:VIVHY) owned Canal+ is expected to give it an edge in the country. In September 2019, the company partnered with Canal+ to launch an integrated bundle in France.

However, competition is poised to intensify with the launch of Disney’s (NYSE:DIS) Disney+ in France on Mar 31, 2020. Moreover, Canal+ has signed a deal with Disney to be the sole distributor of Disney+ in the country.

Additionally, Amazon’s (NASDAQ:AMZN) prime video is working on four new French projects set to be launched in 2020 and 2021, which include Voltaire Mixte, a dramatic comedy, and Opérations Totems, a spy series, among others.

Zacks Rank

Netflix currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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