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Netflix’s plan to solve its subscription crisis begins in Asia

Netflix’s plan to solve its subscription crisis begins in Asia

Netflix's plan to solve its subscription crisis begins in Asia

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Netflix is ​​looking to Asia after its shock first-quarter slowdown, looking both to maintain growth in the one region where it continues to add subscribers and to replicate its success there in other parts of the world. .

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Despite plans to reduce overall spending, investment in Asia will continue to grow, including funding for local film and series production, said Tony Zameczkowski, vice president of business development for Asia-Pacific, in an interview.

While Netflix will continue to offer low-cost mobile subscriptions across Asia, it is also seeking more partnerships with wireless carriers and digital payment companies to reach more potential customers in a region where mobile usage credit card is less common, he said. The company’s Asian strategy informs moves in other emerging markets, where the platform must also expand to balance saturation in North America and Europe.

“Asia is a great proxy for other markets around the world,” Zameczkowski said. “There are similarities between emerging Asia and other emerging markets like Africa and Latin America. The learnings here can be easily replicated or leveraged by these regions. »

The world’s largest streaming platform is at a critical juncture. Shares have surged in recent years as subscriber numbers have soared, but the company reported its first loss of customers in more than a decade in April and expects another contraction this quarter amid fierce competition from its rivals. With two-thirds of its market value wiped out since mid-November, Netflix is ​​under pressure to renew a content pipeline that has lost its shine, while cutting costs.

The company has already made inroads in Asia-Pacific, but the widespread slowdown provides further momentum to build on the success of South Korean mega-hits like “Squid Game” and “Hellbound,” which have boosted subscriptions.

The Asia-Pacific region accounts for 15% of Netflix’s 221.6 million global subscribers and is expected to be the main driver for further expansion. After a disappointing start to the year, analysts expect a rebound in the second half that will see the company add around 6.8 million members for the full year, 79% of them from Asia- Peaceful.

Upcoming challenges

Yet the region’s vastly different audiences, preferences and operating environments pose risks. New users in Asia-Pacific totaled 1.1 million in the first quarter, down 20% from a year earlier, and the company faced cultural and political challenges entering certain markets. The ‘Adequate Boy’ series sparked controversy in India in 2020 over a scene showing its Hindu protagonist kissing a Muslim man, while the company cut a show for Vietnamese audiences after the government said a card there violated the laws of sovereignty.

Netflix customers in Asia are also among the lowest valued, which means many more subscriptions are needed to generate revenue. The pace of revenue growth is already the slowest since records began in 2017 after the introduction of low-cost mobile-only plans across Asia and falling prices in India. Average revenue per member fell 5% to $9.21 (around Rs. 720) per month in the Asia-Pacific region, compared to a 5% increase to $14.91 (around Rs. 1,170) in the United States and in Canada.

“They’re trying to create a deeper customer funnel,” said Vivek Couto, executive director of Media Partners Asia. “You can’t raise prices unless you have a large customer base.”

Netflix also faces fierce competition from streaming giants such as Amazon.com and Walt Disney, as well as local companies that have made inroads into Asian markets. In Southeast Asia, Viu, owned by billionaire Richard Li, overtook Netflix to become the region’s second-largest streamer last year due to its vast library of Korean content and a free subscription tier.

To compensate for steep price discounts, Netflix needs to focus on expanding the user base, both in high-income countries like Japan and Korea, as well as in emerging markets like Thailand and Indonesia, Couto said.

In India, that would require adding 20 to 30 million subscribers for revenue to be meaningful, he said. The market had around 5.5 million subscribers last year, according to the consultancy firm’s estimates.

It will probably be a difficult challenge. Many people in the country still prefer to watch movies in cinemas and dramas on traditional television, with streaming services relying heavily on live programming to attract customers. Even Disney, of which Disney+ Hotstar is one of the dominant players in the market, is facing a potential drain of subscribers after losing the rights to broadcast lucrative Indian Premier League cricket matches.

While major competitors have all introduced tiered pricing such as mobile-only plans, Netflix is ​​going above and beyond to attract signups through innovative payment methods, such as allowing users to include their subscription fees in their bills. monthly phone bills or pay via digital wallets.

Netflix offers a wider range of payment choices in Asia than its competitors, Couto said. The number of new members who signed up last year using alternative payment methods more than tripled from the previous year, and these measures have been adopted in other markets after their successful launch in Asia, according to Netflix.

Asia could also be part of Netflix’s latest plan to boost revenue by introducing advertising. While Zameczkowski said it’s too early to say in which markets the company will launch the new model, he believes it would make the platform more accessible to customers.

“Even though the business is entering a new phase of slower growth, Asia is very exciting and presents many opportunities,” Zameczkowski said. “We’ve only just started.”

© 2022 Bloomberg L.P.


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