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Netflix Rises on Rapid Global Expansion, Adds 130 Countries

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"Today you are witnessing the birth of a new global Internet TV network," said Netflix (NFLX - Free Report) CEO Reed Hastings as he declared at CES 2016 that the streaming giant is now expanding to another 130 countries across the globe, thus establishing its presence in a total of 190 countries.

The news came as a relief for investors, especially after the slump on the first trading day of 2016. Shares were up about 9.3% yesterday.

Rapid international expansion has been one of the most important agendas for Netflix for the last couple of years. This expansion is so far the biggest by the company as it stretches to cover as much of the globe as it can.

Some of the nations that came under Netflix’s fold following this expansion include India, Azerbaijan, Vietnam, Nigeria, Poland, Russia, Saudi Arabia, Singapore, South Korea, Turkey and Indonesia among others. However, China proved to be a walled garden for the company. Hastings said that they are still working on bringing the service to China. In addition he mentioned that Netflix will not be available in some regions like Crimea, North Korea and Syria at present owing to certain government restrictions.

In order to attract new users, Netflix is making its service available for free in the first month.

Apart from this, Hastings also announced plans to add more regional languages. In addition to the 17 languages it already caters to, the company has now added Arabic, Korean and Chinese (both simplified and traditional).

The company declared that in 2016 it will be bringing out as many as 31 original series (including both new and sequels), about 24 original feature films and documentaries, 30 original kids series and even a number of stand-up comedy shows. Furthermore, in order to reinforce its image as a global provider, the company will time these releases so that they are available across the globe simultaneously. On the content acquisition front, Netflix has also expanded its partnership with DreamWorks Animation SKG Inc. , which will add to its animation offerings.

Netflix also revealed that it saw a 46% increase in streamed hours in 2015 to 42.5 billion over the last year. In fact, the holiday splurge led volume to a solid 12 billion hours in Dec 2015 alone.  

While expansion of this scale is impressive (especially if we consider the content expansion which is required to support it), it raises a few concerns as to whether the company has bitten off more than it can chew. All this will undoubtedly make its operating and content acquisition costs astronomical. On the other hand, revenues will come with time.

Nonetheless, as of now, investors are pleased that the company has achieved the target that it set for 2016 (well, almost). Netflix had earlier promised to cover 200 countries by 2016, which means it’s only 10 short of its target with most of the year to go.

Also, this move raises competition levels for Netflix’s peers like Hulu, Amazon.com (AMZN - Free Report) and Time Warner’s HBO.

While Netflix currently carries a Zacks Rank #4 (Sell), this can change on Jan 19 when the company is scheduled to announce its fourth-quarter and full year 2015 results.

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