The one-two punch that could hurt Netflix internationally

Netflix's massive international expansion is driving subscriber growth, but there is a one-two punch that could hurt it in the short term, according to analysts at Bank of America Merrill Lynch.

The crux of the issue is that being a Netflix subscriber in some of its newly available countries simply isn't as good a deal as being a US subscriber, the analysts explained in a note on Thursday.

Why? Selection.

The US has almost three times the number of shows and movies that other major subscriber countries (like Canada and the UK) have, and a whopping 10 times that of some recently launched markets. That's a big difference in value for those customers.

Here's a chart from the analysts that shows how countries with over one million Netflix households stack up against each other.

Some Netflix fans have historically gotten around these content discrepancies by subscribing to a US account and then using VPN software - which cloaks their computer's location - to trick Netflix into thinking they were watching from the US.

Not anymore.

Netflix recently cracked down on this practice, eliminating most VPN users from its service - at least for now. This hasn't gone down easy for those users. In a recent survey of Netflix subscribers who used VPNs, 61% said new policy would affect whether they kept their Netflix subscription. And if the option to use a VPN isn't available, it could also hinder Netflix's ability to grab new subscribers.

Long Term

But while the combination of a lack of content and a VPN shutdown has the potential to hurt Netflix in the short term, the analysts said they still see a long-term growth story in the company.

That's because Netflix has invested heavily in original content, which is much easier to deal with in terms of global licensing.

Netflix executives have repeatedly said original content will drive the company's future, and that Netflix's eventual goal is to have the vast majority of its shows and movies available in every country Netflix operates in.

That said, the analysts see the potential for subscriber volatility in the next few quarters, and think it could miss Wall Street estimates for subscriber growth.

Another risk factor the analysts point to is the expiration of grandfathered $7.99 Netflix plans, which will increase to $9.99 in June.