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 From complaints that programming libraries offered in many countries
are far smaller than in the United States to delays in offering its
signature "House of Cards" series in some markets due to rights
issues, the U.S. video streaming giant's January launch into 130 new
markets worldwide, including a slew in Asia, has been bumpy.
When it launched in Indonesia in January, for example, Netflix ran
afoul of the film censorship board for carrying content deemed
inappropriately violent or sexual. The communications ministry also
demanded that Netflix set up a local office and pay Indonesian
taxes.
State telecoms company PT Telekomunikasi Indonesia Tbk (Telkom) will
continue blocking Netflix until it adheres to regulations, Arif
Prabowo, vice president for corporate communications at the carrier,
told Reuters, declining to give details.
Netflix is still available in Indonesia via wifi connections and
other carriers.
"Services delivered over the Internet present new questions for
everyone, including policymakers, and our intention is to comply
with applicable laws and regulations," said Jessica Lee, Netflix's
head of communications for Asia.
"It is all part of the journey as we roll out in different
countries," she said.
The cost of dealing with these kinds of issues are reflected in its
results, which show that Netflix suffered a first-quarter operating
loss of $104.2 million for streaming video outside the U.S., partly
because of higher marketing costs, and also showed that it is
earning less per subscriber overseas than at home.
Netflix had 34.5 million international subscribers against 47
million in the U.S. at the end of the quarter. It is unclear how
many of its customers are in Asia.
LICENSING RESTRICTIONS
In South Korea, where local content is popular and consumers have
numerous streaming options, the Netflix site offers fewer than 20
local TV shows or movies.
"Korean Netflix's library in terms of content is pretty thin," said
Jung Dong-yoon, a 29-year-old Seoul office worker and subscriber
since January.
Netflix viewers in the country also this week discovered that
well-known shows including "How to Get Away with Murder" and season
two of "Better Call Saul" were missing - temporarily, Netflix says -
as the shows are submitted for age appropriate ratings by the
country’s ratings board.
Programming rights are an issue globally.
As of January, Netflix Australia, which launched service more than a
year ago, offered just 443 TV shows, compared with 1,157 in the
United States, and had 1,585 movies, compared with 4,593, according
to Finder.com – fewer than those available in Iraq, Haiti, Cuba and
many other countries.
"With the traditional way in which rights to movies and TV titles
are structured, there will be licensing restrictions and the goal is
to get to a global library that is the same everywhere but that
takes time," Lee said.
Vivek Couto, executive director of consultants Media Partners Asia,
said it is still early in Asia for Netflix. He expects the company
will ramp up local content and eventually get "reasonable
penetration" in markets such as India, South Korea, Singapore, Hong
Kong, the Philippines, Thailand, and Vietnam.
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"Markets like Singapore and India, over time, they can do reasonably
well, but I think they're going to find more challenging markets
like Japan, Korea, China," he said.
Netflix has yet to win permission to enter the coveted but highly
restricted China market.
SLOWER GROWTH
Netflix this week said it expected to add about 2 million non-U.S.
subscribers in the second quarter, below analysts' average
expectations for about 3.5 million.
Chief Executive Reed Hastings on Monday cited a lack of local
language content and local payment options for limiting initial
sign-ups in some countries.
"Over the next couple years as we further localize, we'll be able to
see more opportunity," he told analysts on a conference call.
Netflix can take heart from its performance in Latin America, where
it launched in 2011 and is by far the dominant video streaming
service.
However, it has seen its share of the key Mexican market eroded
slightly by competition from Clarovideo, a streaming service offered
by billionaire Carlos Slim’s America Movil.
One of Netflix’s biggest obstacles to growth in Mexico has been the
low-level of broadband subscribers, according to one industry
source. Broadband availability also looms as a potential concern in
Brazil, where the telecoms regulator announced earlier this week
that broadband providers would soon be allowed to set Internet usage
limits.
In Asia, Competition is intensifying from local streaming sites as
well as global providers such as Amazon, Hulu, HBO and BBC iPlayer.
Around the time Netflix debuted in South Korea, local company
Frograms Inc launched its own Watcha Play service. Two months later,
SK Telecom Co Ltd made its video streaming service available to
customers who do not subscribe to its phone service.
Around the time Netflix debuted in Australia, publisher Fairfax
Media Ltd and broadcaster Nine Entertainment Co Holdings Ltd
launched a joint venture streaming service, while News Corp
and Seven West Media Ltd teamed up to do the same. All offered heavy
discounts, including free trials.
Netflix had an explosive start in Australia, counting nearly 3
million Australians as viewers, OUT OF A population of 24 million,
within nine months of its March 2015 launch. But growth has slowed
just as dramatically, from a 55 percent leap between April and May
to a rise of 4 percent between September and October, according to
Roy Morgan research.
(Additional reporting by Christine Kim in Seoul, Aradhana Aravindan
in Singapore, Cindy Silviana and Yuddy Cahya in Jakarta, Byron Kaye
in Sydney, Michael O’Boyle in Mexico City and Brad Haynes in Rio de
Janeiro; Writing and additional reporting by Tony Munroe; Editing by
Martin Howell)
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