Netflix in SE Asia: Lessons for OTT players?

netflix viewersThe global video streaming market is set to reach USD 70 billion by 2021, and Netflix aims to cash in on the 18% compound annual growth rate amid rising competition.

Already the world’s leading video-streaming service with over 81 million members, Netflix is accelerating its worldwide expansion, including a rollout into Southeast Asia (SEA). But its recent foray into SEA has been fraught with challenges that are becoming increasingly familiar to Over-The-Top (OTT) players expanding into emerging markets: thorny content and regulatory issues – and a crowded competitive landscape that complicates pricing models.

Content and regulatory hurdles

Globally, Netflix viewers watch more than 125 million hours of TV shows and movies per day, but Netflix is struggling to offer its competitive library to viewers in SEA.

On the heels of Netflix’s January 2016 launch, for example, state telecoms company PT Telekomunikasi Indonesia Tbk – Indonesia’s largest telecommunications provider – blocked access to Netflix’s video streaming service citing a lack of a proper content-provider permit and what they deemed offensive violent adult content offered by Netflix. This is consistent with complaints recently made by the Indonesian Film Censorship Board, which has the right to approve all films, courtesy of a 2008 film law. In addition, Netflix may also face bans in Vietnam and in Malaysia, a Muslim country with content controls.

Rights issues have also caused problems for Netflix in SEA. Consumers are upset that Netflix program libraries do not mirror those available in the US. Based on rights issues, signature offerings as the popular “House of Cards,” for example, were not immediately part of the program lineup in most of the region. Also, Netflix’s local content offerings are  currently not considered very robust, limiting their appeal.

A crowded field

The regulatory issues facing Netflix in SEA, however, pale in comparison to the significant and growing competition the company faces from local, regional, and international services.

For example, Hong Kong-based PCCW’s Vue is in Singapore; Singapore’s SingTel’s HOOQ serves India, Thailand and the Philippines; HBO Go is in Hong Kong and the Philippines; and iflix – with deep purse strings courtesy of MGM – operates in Malaysia, the Philippines and Thailand. In addition, China video platforms are also spreading to the region.

Discussing competition for Netflix in a recent IHS Market Insight Report, Jun Wen Wood, IHS broadband and mobile media analyst noted: “SKY, one of Europe’s largest media companies is investing USD 45M in Southeast Asian SVoD service iflix.” The crowded marketplace is also facing fresh competition from overseas, she says, as “…U.S. studios have licensed much of their product to regional streaming players such as iflix, which reported it had reached 1 million sign-ups in December six months after launching in Malaysia, followed by Thailand and the Philippines, and HOOQ, a co-venture between Singaporean telecommunications company SingTel Group, Sony Pictures Television and Warner Bros. Entertainment.”

Pricing pressure

Startups in the region are also launching lower-pricing-than-Netflix alternatives, not only providing a less expensive service but local content that works with available slower Internet speeds – a missing combination thus far from Netflix.

Netflix offers streaming quality that is higher than competitive offerings — the subscription rate, for example, is double that of HOOQ in the Philippines. Netflix is obviously targeting affluent customers that have the discretionary income to pay a higher price for faster connections.

While there seems to be a learning curve for Netflix in this market on regulatory issues that will take some time to master, in time, it will likely gain a foothold with the target audience it is clearly attempting to attract.

Carolyn Mathas

MathasPhoto2015__2_@CarolynMathas is a technology writer/editor for a number of industry publications. She writes for the LED and Wireless Networking Design Centers on EDN, and previously several DesignLines and CommsDesign for EE Times.  Previously, she was a Senior Editor at Lightwave Magazine and a West Coast correspondent for CleanRooms Magazine.Carolyn holds an MBA from New York Institute of Technology and a BS in Marketing from University of Phoenix. In addition to editorial, her professional experience includes Director of Marketing positions at Securealink and Micrium and PR/marketing services to such companies as Philips Semiconductors, Altera, Boulder Creek Engineering and Lucent Technologies.

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