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Netflix: Prospects Across APAC

Netflix has taken a major stride towards fulfilling its global ambitions, simultaneously opening shop in more than 130 countries earlier this month.

China, the only major market where the SVOD giant has yet to launch, is going to take more time.

We highlight Netflix’s potential across key markets in Asia-Pacific:

 

Australia & New Zealand  Despite strong local competition from players such as Stan (owned by Nine and Fairfax), Presto (Foxtel and Seven), Neon (Sky TV), and Lightbox (Spark NZ), Netflix has secured an estimated 1.3 million paying subs across Australia and New Zealand almost a year after launch.

This equates to significant penetration in two predominantly English-language markets dominated by high pay-TV Arpus with only a fraction of the titles that Netflix carries in the US.

 

India  It’s very early days in India, especially as SVOD accounts for just 10% of a US$150 million online video market, according to Media Partners Asia (MPA). At the same time, payment infrastructure is poor and broadband penetration remains low.

Nonetheless, 4G and fiber broadband launches from Reliance, Airtel, Idea and Vodafone could dramatically alter the landscape over the next three years. Digital wallets should also scale up significantly.

Netflix’s pricing and content focus implies a niche positioning in a country where Hindi, regional and vernacular content, as well as sports, dominate.

Even within this niche however, MPA estimates that Netflix could land close to 2 million subs within five years. Deeper and broader penetration will require local content partnerships.

The quest for quality local IP will be tough, as leading broadcasters and rights-owners, including Star, Zee, Viacom and Sony, are investing in their own OTT services.

Netflix, however, is set to approach a number of local production houses and content groups.

Indians account for a significant population globally, and Netflix could potentially justify investment in premium Hindi, non-Hindi and mythological programming.

Netflix's full suite of existing content has also yet to hit India. MPA channel checks suggest ~90% of the movies and TV shows available in US have yet to be introduced to Indian audiences.

 

Korea  TVOD windows are popular and attractive in Korea’s highly penetrated pay-TV market, which is dominated by local players such as CJ E&M, JoongAng and SBS.

Netflix currently offers limited Korean content, comprising five TV series and 15 local movie titles.

As expected, negotiations with most broadcast and pay-TV networks have proved frustrating but there are ongoing discussions with local producers as well as one to two major content groups.

 

Japan  Since launch last September, Netflix has made slow progress in terms of paid subs although the company has tied up with Fuji Media and Yoshimoto Kogyo to produce and distribute original local content.

Netflix chief content officer Ted Sarandos has indicated that non-Japanese content has performed surprisingly well, accounting for 40-50% of overall viewing.

 

Southeast Asia  In some of these markets, telco integration is the easy part.

In Singapore, both Singtel and StarHub recently announced set-top box and online partnerships with Netflix.

Such alliances are also likely with telco and, in certain cases, pay-TV players in Hong Kong, Malaysia, and Thailand.

Indonesia and the Philippines, we suspect, will be more challenging as telco video integration plans will be a lot cheaper and aimed at the mass demographic, which in Indonesia in particular, is anchored to local content.

Localization is however on the cards in Indonesia, where Netflix has already started to acquire movies and recent releases for global distribution targeting the AB demo.

Thailand, meanwhile, is already home to several local SVOD plays with existing US content deals such as Doonee, Hollywood HD and Primetime, adding another hurdle for Netflix.

Netflix’s current offer in Southeast Asia and Hong Kong is complicated by the paucity of its current library and the fact that it’s licensed some key titles to pay channels (i.e. House of Cards to RTL-CBS).

That said, a marketing boost from telcos could help Netflix secure reasonable penetration in Singapore and other markets with high broadband penetration and pay-TV Arpus, as more of its library comes online.

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