Cloud smooths the way for Netflix's UK entrance

Streaming video service Netflix has confirmed it will finally expand its operations to cover the UK and Ireland from early 2012, as cloud computing has lowered the barriers for international growth.

Customers will have been waiting nearly eight years for the film service – which allows users to watch streamed movies and TV shows via their home computers – to begin UK operations, after its original plan to expand in 2004 was mothballed.

The company, renowned for its innovative use of cloud computing to support its film streaming, will put further international expansion plans on hold after launching in the UK.

Netflix is fast becoming the poster child for cloud-based businesses, having switched from relying on its own datacentres, packed with IBM servers running Oracle databases, to utilising Amazon Web Services (AWS).

The switch to the cloud has allowed Netflix to expand rapidly, without incurring the hardware costs associated with running its own datacentres and avoiding the need to hire system and database administrators.

Netflix's cloud architect, Adrian Cockcroft, explained the thinking behind the embrace of public cloud services in a recent blog post.

“I come to use clouds because I work for a developer-oriented company that has decided that building and running infrastructure on a global scale is undifferentiated heavy lifting.” he wrote. “We can leverage outside investment from AWS and others to do a better job than we could do ourselves.”

It uses AWS for encoding movies for streaming, log analysis, as well as its production web site.

But the UK expansion will nevertheless be costly for Netflix. According to chief executive Reed Hastings, the firm is expecting to operate at a $65m (£40m) loss in its fourth quarter because of the costs of expanding into Latin America – which it did in summer 2011 – and the UK. These costs are largely driven by the cost of licensing content for customers in these countries, rather than operational costs.