netflix asia

Netflix is setting its eyes on the Asian market to fuel its growth in upcoming years after experiencing an unexpected retreat in the number of paid subscribers in various key regions including the crown jewel – the United States and Canada.

Even though the senior management has stated that they plan to cut spending in the following quarter to prepare for a shift in the macroeconomic landscape, investments within Asia are expected to expand through the production of local content.

In regards to this strategic shift, Netflix’s VP of business development for Asia Pacific, Tony Zameczkowski, stated: “There are similarities between emerging Asia and other emerging markets like Africa and Latin America. Learnings here can be easily replicated or leveraged by those regions”.

Netflix’s history in Latin America has been relatively successful as the company manages to bring in nearly $1 billion per quarter from that particular region despite its average revenues per user being nearly half what they collect from top-tier geographies such as the US and Canada.

The company has already been leveraging the talent of local producers in Asia lately and some of its bets have turned into home runs such as “Squid Game”, “The White Tiger”, and “Crash Landing on You”.

Recently, Netflix (NFLX) launched a remake of the popular Spanish series “Money Heist” that will be ambiance in Korea. This production showcases the strong efforts made by the production team to bring the regionalize the most successful Western titles to see if they can become big hits in Asia as well.

A Reduced Library Remains a Challenge for Netflix in Asia

Even though the Asian market is quite large and might look like the promised land for Netflix at a point when growth in the West is stalling, there are several cultural differences that producers will have to consider if they wish to stay off regulators’ spotlight.

Religious conservatism, politics, and laws concerning diversity and gender equality are some of the most relevant topics that will have to be carefully considered when putting content in front of Asian audiences.

In some of these regions, the company’s content library is comparably thin as many shows fail to get approval from local authorities to be displayed in their respective countries.

In regards to these challenges, Vivek Couto from Media Partners Asia commented: “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”.

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Aside from these cultural matters, Netflix also has to find a way to promote its services to the masses more creatively by partnering with local telecom companies to create bundles and other similar offerings.

The reason for this is that, with a thinner library, viewers may not feel comfortable adding another subscription service to their monthly budget unless it represents a significant upgrade from the current situation.

Asian Users Are Not Yet Profitable Enough to Pay the Bills

So far this year, shares of Netflix have lost over two thirds of their value as tech stocks have been pummeled by a shift in macroeconomic conditions while, at the same time, the company’s prospects appear to be deteriorating as reflected by its disappointing quarterly performance.

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At the moment, Netflix primarily commercializes a mobile-only version that generates little revenue compared to the traditional packages sold in other regions. During the first quarter of 2022, Asia brought the least revenues to Netflix at around $916 million.

However, the company finished the period with 33.72 million paid subscribers and managed to offset a large number of the subscribers lost in other latitudes due to the 1.09 million it added in Asia.

However, average revenues per user are considerably low due to the way the service is commercialized at $9.2 per month per user. Comparatively, the average user in the US and Canada brings $14.91 per month for the company while in Europe the figure is slightly lower at $11.56.

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