By Anser Haider
© SNL
Netflix Inc.’s recent global rollout may have opened up the streaming giant to hundreds of millions of consumers worldwide, but analysts think it will take some time for the company to gain momentum in Southeast Asia.
First of all, Southeast Asia is not a homogenous region, warns Vivek Couto, executive director of media consulting and research firm Media Partners Asia. He told SNL Kagan that each market has different local preferences and varying levels of broadband penetration.
Further, a growing number of OTT players are active in the region, such as HOOQ, a co-venture between SingTel, Sony Corp.’s Sony Pictures Television and Time Warner Inc.’s Warner Bros. Video-on-demand platform iflix is also making waves. Netflix’s sudden arrival may jolt existing companies to up their game.
Jim O’Neill, principal analyst at Ooyala, said that in the past there were plenty of advance warnings when new platforms launched, and companies could slowly ramp up their offerings.
Yet, “this launch was so aggressive and so sudden that it caught a lot of operators and service providers flat footed and they are going to have to react very aggressively and quickly to not get rolled over by what is quickly become the Netflix tank,” O’Neill told SNL Kagan.
Moreover, Couto singled out a distinct advantage that Netflix has over most other OTT players in the region, namely brand power.
“OTT consumers don’t really care about statistics. It is the brand and marketing that matters and Netflix is probably one of the best in the business when it comes to that,” he said.
Couto believes Netflix has a better chance to pull in subscribers in markets that have a well-established physical broadband infrastructure, namely in the more developed markets of Singapore and Malaysia.
However, other Southeast Asian markets, such as Indonesia, Thailand and the Philippines will prove to be more challenging, especially in the short term, as pricing may prove to be a burden in particular.
“If you add up all the services a consumer has to deal with, including TV, broadband and telco, the costs [for Netflix] are quite high,” Couto said.
For example, a basic monthly Netflix subscription in Thailand costs 280 Thai Baht, while Malaysians pay 33 Ringgit and Indonesians 109,000 Indonesian Rupiah for a basic subscription, all just under $8.
“I know their economies are growing [and] they have a great youth population, but it will still take time for a service like Netflix to capture those markets,” Couto noted.
Having said that, he is confident that there are customers who are willing to shell out more money for OTT subscriptions. Over time, Netflix should be able to determine where they have more scale so they can start expanding the service in a more focused manner, like they are doing currently in Japan with Fuji TV, Couto explained.
“They will then start localizing more aggressively and will even potentially consider differential pricing in the future,” he added.
Netflix has started to reach out to local providers and telcos in order to reach new audiences. It recently struck two local deals in Singapore. Under an exclusive partnership with telco SingTel, new and re-contracting customers will receive complimentary Netflix subscriptions for up to nine months when they sign up from Jan. 22 to July 22. Customers will also be able to access Netflix via the telco’s set-top boxes from April.
Meanwhile, a deal with StarHub Ltd. allows the company’s Fibre TV subscribers to access Netflix through their set-top boxes by the second quarter of 2016.
O’Neill is confident that subscriber growth will accelerate if the company manages to strike more deals locally and settles on a plan that makes sense to consumers. He said local deals like the agreements with SingTel and StarHub are important for Netflix as it gives the company a direct entry into potential subscribers’ homes.
Netflix may try to pursue more partnerships in Southeast Asia; it does face the challenge of a staggering rate of piracy. Just about every film and TV show available on Netflix is available at practically every local market or mall. It remains to be seen whether consumers are prepared to pay for content that they can easily acquire for a fraction of Netflix’s monthly fees.
O’Neill thinks that not launching in China was at least in part a nod by Netflix to the specter of piracy.
However, “[Netflix CEO] Reed Hastings has said in the past [that] making a boatload of premium content available at a reasonable price was the prescription for eradicating the video piracy plague,” O’Neill noted.
As Netflix has successfully rolled out in countries such as Spain and Australia, which also have a long history of pirated content, O’Neill thinks this illustrates piracy challenges can be overcome, as many consumers would rather purchase and consume content legally, instead of watching illegal copies that are mostly of poor quality.
“Will [Southeast Asia] fit that model? I think so,” he noted.
Couto also pointed out that while other OTT services mainly offer Hollywood content, Netflix is relying increasingly on its own original content, which has helped the service to solidify its brand on a global scale.
That content, however, is also a double-edged sword for Netflix. While many subscribers may be keen to watch the company’s video fare, including Netflix originals such as “House of Cards” and “Orange is the New Black,” the fact remains that regulators in Southeast Asia may consider a bulk of the material too risqué or indecent. O’Neill said singled out Indonesia and Malaysia.
“There will surely be pushback from countries that have more stringent regulation. Indonesia, for example, is trying to put the genie back in the bottle,” he concluded.
Couto also pointed out that while other OTT services mainly offer Hollywood content, Netflix is relying increasingly on its own original content, which has helped the service to solidify its brand on a global scale.
That content, however, is also a double-edged sword for Netflix. While many subscribers may be keen to watch the company’s video fare, including Netflix originals such as “House of Cards” and “Orange is the New Black,” the fact remains that regulators in Southeast Asia may consider a bulk of the material too risqué or indecent. O’Neill said singled out Indonesia and Malaysia.
“There will surely be pushback from countries that have more stringent regulation. Indonesia, for example, is trying to put the genie back in the bottle,” he concluded.