Netflix’s plan to fix its subscription crisis starts in Asia


The company’s Asia strategy is informing moves in other emerging markets, where the platform must also grow to balance out saturation in North America and Europe. — AP

Netflix Inc is looking to Asia after its shock first-quarter slowdown, seeking to both maintain growth in the one region where it’s still adding subscribers and replicate its success there in other parts of the world.

Despite plans to curb overall spending, investment in Asia will keep growing, including financing for the production of local films and series, Tony Zameczkowski, vice-president of business development for Asia Pacific, said in an interview.

ALSO READ: Netflix lays off 300 workers amid subscriber losses

While Netflix will continue to offer low-price, mobile-only membership across Asia, it’s also seeking more partnerships with wireless operators and digital payment companies to reach more potential customers in a region where credit card use is less common, he said. The company’s Asia strategy is informing moves in other emerging markets, where the platform must also grow to balance out saturation in North America and Europe.

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

ALSO READ: Report: Netflix to charge extra for password sharing by end of year

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

The company has already made inroads in the Asia Pacific but the broader slowdown gives added impetus to build on the success of South Korean mega-hits like Squid Game and Hellbound, which boosted subscriptions.

ALSO READ: South Korea broadband firm sues Netflix after traffic surge from ‘Squid Game’

The Asia Pacific region accounts for 15% of Netflix’s 221.6 million global subscribers and is forecast to be the biggest driver of further expansion. After a disappointing start to the year, analysts expect a rebound in the second half will see the company add about 6.8 million members for the whole year, with 79% coming from the Asia Pacific.

Challenges ahead

Still, the region’s widely differing audiences, preferences and operating environments pose risks. New users in the Asia Pacific totaled 1.1 million in the first quarter, down 20% from a year earlier, and the company has faced cultural and political challenges in penetrating some markets. The series A Suitable Boy triggered controversy in India in 2020 over a kissing scene, while the company removed a show for Vietnamese audiences after the government said a map in it violated sovereignty laws.

ALSO READ: Netflix plans ‘Squid Game’ reality show with big cash prize, no fatal consequences

Netflix’s customers in Asia are also some of its lowest-value ones, which means many more subscriptions are required to juice revenue. The pace of revenue growth is already the slowest since records began in 2017 after low-priced mobile-only plans were introduced across Asia and prices slashed in India. Average revenue per membership fell 5% to US$9.21 per month in the Asia Pacific, compared with a 5% increase to US$14.91 in the US and Canada.

“They are trying to create a deeper funnel of customers,” said Vivek Couto, executive director of Media Partners Asia. “You can’t increase prices unless you’ve got a significant customer base.”

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

To make up for the steep pricing discounts, Netflix must concentrate on expanding the user base, both in high-revenue countries like Japan and Korea as well as emerging markets such as Thailand and Indonesia, said Couto.

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

This will likely be an uphill challenge. Many people in the country still prefer to watch movies at cinemas and dramas on traditional TV, with streaming services relying heavily on live programming to draw customers. Even Disney, whose Disney + Hotstar is one of the dominant players in the market, is facing a potential subscriber drain after losing the rights to stream the lucrative Indian Premier League cricket matches.

ALSO READ: Netflix slashes India prices in battle with Disney, Amazon

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

Netflix offers a wider range of payment choices in Asia than competitors, Couto said. The number of new members signing 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 raise revenue via introducing advertising. While Zameczkowski said it’s too early to tell in which markets the company will launch the new model, he believes it would make the platform more accessible to customers.

“Even though the company is entering a new phase of slower growth, Asia is very exciting and presents a lot of opportunities,” said Zameczkowski. “We are just getting started.” – Bloomberg

Article type: free
User access status:
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!
   

Next In Tech News

Self-driving vehicles on UK roads by 2025 under new government plans
Pairing your phone with your car can be a hassle, but it’s worth it
Binge-watch much?�Streaming doesn’t have to be an energy-hog
Is your solar power system performing at its best?
‘Escape Academy’: Hone your skills for the next escape room adventure
Britain sets out roadmap for self driving vehicle usage by 2025
Crypto exchange FTX ordered to halt 'false and misleading' claims by U.S. bank regulator
Musk approaches brain chip startup Synchron about deal amid Neuralink delays -sources
Russia to enforce search engine disclaimers on five foreign IT firms
Stablecoin Tether's reserves fell $16 billion in second quarter due to redemptions

Others Also Read