A sign is posted in front of the Netflix headquarters in Los Gatos, California.Justin Sullivan/Getty Images
Netflix Inc., the online television and movie service, is moving closer to profitability in Canada, less than a year after its launch here.
The California-based company said Monday it was just shy of the one-million subscriber mark as of June 30, reaching 967,000 Canadian customers.
It drew $18.9-million (U.S.) in revenue from its international business, which consists only of Canada. But that will soon change. After using this country as a testing ground, Netflix will launch its service in 43 countries in Latin America and the Caribbean later this year. It also plans to launch in another international market, not yet announced, in the first few months of 2012.
"We're going to launch with much more content [in Latin America]than we did proportionately in Canada. And that's because we're more confident of the outcome, which is part of what we learned in Canada," chief executive officer Reed Hastings said during a conference call to discuss the second-quarter earnings on Monday.
"We started Canada pretty cautiously and then quickly built up the content, and we have more confidence, and so we're starting even stronger in relative terms in Latin America than we did in Canada."
Netflix has not been entirely welcomed in Canada - least of all by some of its TV industry counterparts. In February, a group of media and telecom industry executives formed a working group to consider the impact of "over-the-top" online broadcasters such as Netflix.
The group has asked the federal broadcast regulator to examine whether Netflix should be required to pay into funds for the production of Canadian programming, as domestic TV broadcasters and cable and satellite firms must. Other companies have argued that rather than imposing new regulations, the Canadian Radio-television and Telecommunications Commission should loosen the requirements for everyone.
While Netflix has grown in Canada, it is still reporting a loss here, of roughly $10-million in the three months ended June 30. By its first anniversary at the end of September, it expects somewhere between a $1-million loss and $1-million in profit. This is a slight adjustment from past forecasts, when executives said they would be profitable by then.
With an entrenched business in the U.S. that includes both online streaming and DVD-by-mail subscribers, the Canadian market remains a very small part of Netflix's business. Its total global revenue was $788.6-million in the second quarter, up from $519.8-million at the same time last year. Netflix profit rose 57 per cent to $68.2-million or $1.26 a share.
But the company said it expects subscriber growth in the U.S. to slow next quarter, because of a recent announcement that it was raising subscriber rates for its DVD-by-mail service there.