Netflix faces a tough act in Europe after slow UK start

Netflix, the video-streaming service so popular in the US that it has been blamed for overwhelming the web, may find itself boxed out of the most coveted content in Europe's $76 billion (Dh279.09 billion) pay TV market. In the UK, a deal with broadcaster ITV probably won't include the most recent episodes of successful shows such as Downton Abbey a person with knowledge of the matter said, asking not to be named because the talks are confidential. An agreement with British Broadcasting Corporation last week allows Netflix to offer shows such as Top Gear and only six months after the broadcaster has aired them. Netflix's early entry in the US market helped the Los Gatos, California-based company to become the biggest video-streaming service, even spurring premium channels HBO and Showtime to offer shows online. In Europe, Netflix will have to wrest digital rights away from a cabal of powerful broadcasters who own most of the popular content and have their own streaming services. "Broadcasters are controlling a lot of the premium, online, video-on-demand business in the UK," said Rio Caraeff, chief executive officer of Vevo, a video-streaming company backed by Vivendi's Universal Music and Sony. "They're able to protect their television business by packaging it with their online business." Netflix, whose biggest investors include Vanguard Group, JAT Capital Management and Morgan Stanley, plans to begin its UK service in ‘early' 2012. Local consumers can already choose from video-streaming services by Amazon.com's Lovefilm unit, Channel 4, the BBC, British Sky Broadcasting Group and ITV, the country's biggest commercial broadcaster. Archived shows As with the BBC deal, Netflix may only be able to offer some of ITV's archived content, the person said. ITV declined to comment. The BBC and Netflix named eight shows, including comedy series Fawlty Towers and Little Britain in their December 20 statement and spokesmen for both companies declined to name other programmes that might be part of the deal. "The UK is a competitive market and we look forward to offering the people of the UK and Ireland a great service with fantastic content and ease of use," said Joris Evers, a Netflix spokesman. The company this month reiterated that it currently doesn't prepare to expand into European markets beyond the UK and Ireland. Lovefilm said last week that it signed an exclusive deal with Sony Pictures to offer titles such as The Social Network in the UK Last month, Lovefilm announced a deal to offer Warner Brothers films such as Sex and the City 2 in the UK. BSkyB, the UK's biggest pay-TV provider, has too much market control because of its exclusive first rights to play releases from major Hollywood studios, the Competition Commission said in August. The watchdog said an investigation may not be completed until early 2012. Still, Netflix will offer some popular content in the UK. The company has deals with Lions Gate Entertainment and Metro-Goldwyn-Mayer Studios to be the exclusive streaming provider in the UK and Ireland. The UK service will also stream Miramax films such as Pulp Fiction. The subscription TV market in Europe, Africa and the Middle East, including pay-TV, video-on-demand, mobile and video- streaming services as well as licence fees, will expand 24 per cent to $95 billion in the next four years, according to PricewaterhouseCoopers. Netflix lost 800,000 US subscribers in the third quarter after alienating some customers with changes in pricing and subscription terms. The stock has lost 58 per cent this year, valuing the company at $4.1 billion. CEO Reed Hastings this month likened the fight among online video companies for content to an "arms race". "Netflix's strong cash flow means they have money to burn and buy great content," said Adrian Drury, who leads the media team at consultancy Ovum.