Netflix reaches Asia. How will it fare against its competitors?

‘Netflix and chill’ has become a near-official term for a relaxing night in. This is one indication of the remarkable surge in the fortunes of the US-based video streaming company, which has been given a further boost by its arrival in the technology hungry Asian market.

In July, Netflix sent markets into a flurry of activity when it posted figures showing 3.3 million new subscribers in the previous quarter. According to analysists from IG, this sent its share price soaring from $95 to $126 dollars – something that could happen again if October’s quarterly figures show a similar rise.

In fact, since 2013, it’s been nothing but good news for Netflix, which has grown into a major media market player partly because it has been developed from a content-streamer into a content-creator, with critically acclaimed shows such as Orange is the New Black made for, and exclusively available, on Netflix.

The rise of Netflix

Netflix has been something of a game-changer in the media marketplace, rising from nowhere to become a major-league player, challenging the main US broadcasting giants, such as Fox and NBC, for their share of 24-hour audience figures.

While Netflix ratings can’t be recorded in the same way as those of the TV networks because of their different broadcast model, the fact that its viewers streamed, as Netflix estimates, 10 billion hours of content in the first three months of 2015 shows that it has become a major player. In fact, in the US, 60% of those who watch TV now have a Netflix account.

The massive growth in Netflix’s home market doesn’t mean that its bubble will burst any time soon. In September, the company showed its confidence in the future of its business model by announcing ambitious plans for a global rollout, adding two countries a week, and particularly some in the lucrative Asian market. Netflix “will expand into South Korea, Singapore, Hong Kong and Taiwan in early 2016 as it moves to complete its global rollout by the end of next year.”

This news comes hot on the heels of Netflix’s arrival in Australia earlier this year and in Japan. Its varying fortunes in these two markets are likely to be mirrored in the new territories. In Australia, Netflix swamped the country’s broadband capacity and wiped out the local competition, but things may not be as straightforward as in Japan, where consumers have so far been less keen to pay for videos.

HOOQ

Also, Netflix will not find an empty playing-field in its new territories, as a group of media giants including Sony and Warner Bros have announced plans for a rival service, HOOQ, which offers over 10,000 movies and TV box sets for streaming.

In addition to a large swathe of Sony and Warner brother linked productions, HOOQ also plans to use a segment of its $27.6 million dollar investment to secure rights to local films and television markets to allow for catch up streaming services in key Asian markets such as Indonesia, India, Thailand the Philippines. An area within which Netflix currently has no intention to expand into.

HOOQ intends to utilise Singtel’s carrier billing capabilities to break into the Asian markets, an essential and possibly game changing feature when you take into account credit card adoption in general. This is somewhere Netflix may suffer with their card based online payment system, and could be a catalyst in establising HOOQ as a major player in the Asian streaming markets.

iFlix

HOOQ however, is not Netflix’s only potential headache in the region. iFlix, a Netflix like clone has already secured $30 million in pre-launch funding from major investors such as Malaysia’s ‘Catcha group’. Interestingly though, iFlix will follow HOOQ’s lead in licensing large sections of content from major production companies.

Their main goal is to emulate Netflix’s success in producing original programming and content by using regional production companies and independent producers. If done successfully, iFlix has serious potential to challenge the status quo, and could even lead to them expanding outside of Asia if their shows emulate anywhere near the success of House of Cards, or other Netflix productions.

Whatever happens, Netflix’s combination of a mushrooming subscriber base, a willingness to invent exciting creative content and world-conquering growth ambitions, makes it one of the most attractive companies for investors for 2016.