With the global roll-out of Netflix well under way, Media + Networks caught up with Netflix's Tony Zameczkowski, VP, Business Development, Asia, to find out more about the SVOD giant's strategy in the APAC region.
What's the Netflix take up rate so far in the APAC region? Are you having a positive impact on customer numbers since launch?
We are excited about our reception with consumers in Asia. We don't share country-specific member data, but we started 2016 at 75 million members and today we are at over 93 million. Our customers in Asia are seeing how they can have greater control over their entertainment experience with a service like Netflix, which is commercial-free, and a relatively low monthly subscription at the average price of a movie ticket. They like being able to watch as much as they want, anytime they want and on any internet-connected device.
We know that consumers here were excited to be able to watch our critically-acclaimed TV series like Orange is the New Black, Stranger Things and The Crown at the same time as the rest of the world, and we are continuing to invest significantly in content to bring more great stories and choice to our customers.
Netflix will spend $6bn on content in 2017 and is spreading a meaningful part of that investment over original films and series being made across Asia and around the world. Netflix is opening the doors and broadening the global audience for new creative voices that otherwise have difficulty getting heard, and we are excited about our growing slate of Asian content.
Can you speak of some of the strategic partnerships you've formed in the region that will help drive uptake and keep you competitive?
The role of my team is to supercharge the Netflix's distribution in Asia. By partnering with operators and device manufacturers to help provide a better streaming experience for consumers and enable Netflix everywhere. As the entertainment industry shifts, and with the future of entertainment moving online, these partnerships help drive innovation and create a new ecosystem of partners so that ultimately consumers everywhere get the best entertainment experience they can hope for.
For example, we have successfully partnered with PCCW, CSL in Hong Kong, Globe in The Philippines,Airtel and Vodafone in India, to name a few. We also have global partnerships in place with some Smart TV manufacturers including LG, who will include having a Netflix button on their remote so customers can go directly into Netflix within a few seconds.
Netflix is now available on more than 1,000 different internet-connected devices - everything from a mobile device or a tablet, to a Smart TV or a set-top box.
What are the big challenges you face across Asia?
Asia represents a significant growth opportunity for Netflix. Our early adopters in Asia are usually consumers who are digitally-connected, tech-savvy who have smartphones and own Apple accounts but as we grow, we are starting to build on this momentum into our customer base through deeper local insights.
An example of what we are doing to connect with a larger set of customers is by working to offer alternative method of payments on top of credit cards, such as carrier billing or e-wallets.
We also invest in our own content-delivery network which lowers costs and boosting efficiency for us and our ISP partners. Our Open Connect program supports hundreds of large and small ISPs to directly interconnect with the Netflix network for free in regional locations, rather than going through third-party transit providers.
China is proving to be a challenging market, what do you think is the key to eventually offering a full service in the country?
China represents an indisputable opportunity but right now we are focused on the over 190 markets we are available in. The regulatory environment for foreign digital content services in China has been a challenge and we now plan to license content to incumbent online service providers in China rather than operate our own service in China in the near term. We expect revenue from this licensing will be modest. We still have a long-term desire to serve the Chinese people directly, and hope to launch our service in China eventually.
How has the response been from Asian customers to your programming? Have you seen a need to cater for local tastes with local programming?
Our programming is doing well across the world including Asia and we see originals such as Stranger Things, Orange Is The New Black, The Crown and Narcos doing very well with audiences across the world. Netflix original content offers something for everyone from drama to comedy series, from docu-series, to stand-up specials to films.
As we go global, we are now also spending a meaningful part of our content investment on international content, including from countries across Asia as well to cater to diverse tastes. We are excited about our growing slate of Asian content- some upcoming titles include our first Korean original film Okja, directed by visionary filmmaker Bong Joon Ho, and First They Killed My Father, produced in Cambodia by Angelina Jolie.
We have also announced upcoming Original TV series Sacred Games in India, and Kingdom & Love Alarm in Korea. We also add licensed titles to our local content offering through partnerships with local content distributors across markets like Singapore, Malaysia and Thailand and in India, we also have an exclusive deal with Shah Rukh Khan’s Red Chillies Entertainment.
Where next? What are Netflix's ambitions for Asia?
When we launched globally, we started by primarily targeting the well-travelled, tech-savvy, upper to middle income bracket consumers with international credit cards and smartphones. There’s a lot of traction and working with partners we are building our penetration into the Asian markets. As with every market we’ve launched, our approach has been to listen, learn and improve rapidly as we grow. So far our content has doubled, we’ve added a download feature which is really a result of us listening to consumers in the newer markets like Asia.
Today, the awareness of Netflix in these new markets is growing and with the diversity of Asian markets, there are variances in content tastes. Specifically for emerging markets, there can be challenges with the broadband and payment infrastructures which the growing ubiquity of the internet and rapid technological progress in these markets will overcome very rapidly. All said, in the end, a key part of our growth is focusing on partnerships with operators and device manufacturers so that Netflix can be more accessible across the region.
Have you noticed any trends you can share with us?
What has changed significantly is how quickly content is consumed when you give consumers more control over their experience. On average it takes Netflix users four days to complete a season of a show. Think about how that has changed since the days of linear TV!
As a global platform, we see great stories travelling well across regions. For example, our popular original series from Latin America Narcos has been a top performing show in almost every market we are available in. Our recent original TV series 3%, which is filmed in Portuguese, has seen 50% of viewing hours outside of Brazil. So great stories can come from everywhere and Netflix enables these great stories to find global audiences that they might not have been able to reach before.
To finish, would you like to make any predictions about what we can expect from the industry at large over the course of the year?
2017 will be an exciting year for the Asian customer as entertainment increasingly shifts online.
We expect Internet TV to expand rapidly along with these key trends:
Ecosystem Growth: The Internet is getting faster and more reliable, while penetration of smart TVs and adapters is also rising. Telcos around the world are now moving to deliver better, faster and more reliable internet. At the same time, they are rolling out more open and affordable broadband and mobile data plans catering to a growing consumer demand for streaming content. In parallel, device-makers are remaining relevant in the streaming world by improving their software, hardware and video experiences.
Freedom and Flexibility: The Internet and technology have liberated viewers from a fixed space. Now they can watch TV wherever they want - from smartphones to tablets, laptops to smart TVs. It is not prime-time but on my-time. At the same time, algorithms using viewer profiles and watch history power a personalized experience based on individual tastes, that also provoke the discovery of new programmes and genres of content.
Rapid Innovation: Internet TV apps allow for real-time updates and technological advancements that continually enhance the viewer’s watching experience. In a few decades, linear TV will be seen as a great transitional technology to Internet TV, like fixed-line telephone to the mobile phone. The spectrum of cable, fibre and over-the-air that supports linear TV viewing will be reallocated to expand Internet data transmission. Satellite TV subscribers will decrease and become more rural as connectivity improves.