Netflix’s Battle for Asian Subscribers Pits It Against Rich Rivals, Hundreds of Local Upstarts

When Netflix Inc.

NFLX 0.81%

recently announced that it had suffered its first subscriber loss in a decade, only one region showed growth: Asia.

Asia, home to about half the world’s population, is a relatively untapped market where streaming habits are still forming. It means hundreds of millions of subscribers may still be up for grabs as growth in the US, Europe and elsewhere begins to slow down.

But Netflix faces huge challenges to continue expanding in countries across Asia. The world’s premier streaming battleground is crowded — and generally cheaper.

Park Sae-eun, a tech industry worker in Seoul, enjoys Netflix but spends most of her time streaming South Korean shows on two different local services that offer a wider library of domestic content. If the mega hits no longer come, she would consider canceling her Netflix subscription. “Without original shows, it wouldn’t be worth using Netflix,” said Ms. Park, 27. “For local shows, there are several other platforms that can become Netflix replacements.”

Winning in Asia may require greater investment to create or license local content for budget-conscious consumers, or risk losing ground in a crowded field. Even programs made outside of the region raise the bar for attention in Asia-Pacific due to language or cultural differences. Most consumers want to see shows and movies in their native language, even if they like shows produced abroad.

In addition to Netflix’s US-based rivals such as Walt Disney Co.

‘s Disney+ and Amazon.com Inc.’s

Prime Video, the Asian competition, includes hundreds of local entrants armed with more in-country offerings, with plans selling at lower prices.

There are dozens in South Korea and Japan, 40 in Hong Kong and Taiwan and more than 70 in Southeast Asia, according to Media Partners Asia, a Singapore-based market researcher who tracks various types of on-demand video streaming services in the region. Netflix’s cheapest plan in India, where it recently cut prices to compete with 80 competitors, costs about $2 per month, or three times as much as some homegrown options.

That increases the pressure for Netflix to continue producing blockbusters that can justify the higher price tag, just as the company is cutting back on its lavish spending. What makes Asia different is that streaming is still so relatively new that many viewers are still making a decision, said Vivek Couto, executive director at Media Partners Asia.

To attract more viewers in Vietnam, Netflix recently started offering free access to “Emily in Paris” and other popular shows to people using Android smartphones.


Photo:

/Associated Press

According to Media Partners Asia, more than three quarters of households in mature streaming markets such as the US have already subscribed to a subscription video streaming service. But even in wealthier parts of Asia, such as South Korea and Japan, adoption occurs in less than half of all households, the researcher says. About 10% of households use a subscription video streaming service in India and many parts of Southeast Asia, which together represent about a quarter of the world’s population.

Still, the Asia-Pacific region is already the largest market for on-demand video streaming subscriptions. According to Ampere Analysis, a London-based research firm, it accounts for 43% of the global subscriber base as of this year. That compares to 29% from North America, 16% from Europe and 8% from Central and South America. No region will grow as fast as Asia in the coming years, Ampere estimates.

The region’s numbers include China, which is filled with domestic options and largely cut off from Netflix and other foreign companies.

Netflix has approximately 220 million paid subscriptions worldwide. The 1.1 million subscribers added during the first three months of the year in the Asia-Pacific region represented the only area of ​​quarterly growth in the company’s subscriber base after a collective slump of about 1.3 million members everywhere elsewhere.

At the start of this year, only about 15% of Netflix’s total subscribers and about one-tenth of annual sales come from the Asia-Pacific region.

More Netflix viewers watched dubbed versions of the South Korean drama “Squid Game” than subtitled versions. WSJ met one of the show’s English-language voice actors to see how dubbing foreign content is fueling the streaming giant’s growth. Photo illustration: Sharon Shi

That reflects how Asia’s introduction to streaming lagged several years behind the US, Europe and Latin America. Netflix entered the region midway through the past decade, often as the first streaming service. In many countries people had watched what was broadcast on their standard cable or free network channels. Other countries didn’t have a robust local entertainment industry, meaning it had to wait for Netflix — or some other rival — to come out with deep libraries of quality content that would be worth the cost, said Media Partners of Asia’s Mr Couto.

In recent years, Netflix has learned a lot about local consumer preferences and continues to see opportunities for further investment, said Minyoung Kim, who oversees Netflix’s creative activities and content in the Asia-Pacific region except India.

Netflix came ready to spend on local shows that could help build an audience in Asia. In South Korea, it has spent more than $1 billion on local content, including “Squid Game,” the dystopian drama that became its most-watched show ever. The company has also invested about $400 million in programming in India in recent years. Since last year, to strengthen ties in Southeast Asia, Netflix has been organizing a series writing workshop for local artists, a short film workshop in Thailand and a film competition in Vietnam.

SHARE YOUR THOUGHTS

How can Netflix continue to perform well in Asia? Join the conversation below.

It is also working to develop more localized shows in Japan, and recently entered into an initial partnership with a Japanese animation studio, Studio Colorido, to expand its anime offerings.

That all costs money. Netflix could increase revenue and lower prices by offering an ad-supported version of the service. But Netflix’s main rivals — with non-commercial offerings and competitive prices — are already stealing subscribers like Yuichi Tamura, a 40-year-old engineer at a tech company in Tokyo.

He signed up for Netflix when the pandemic started two years ago, attracted by the South Korean drama “Crash Landing on You.” But few other Netflix shows caught his eye, so he canceled his basic subscription of about $7.70 a month. His kids, he said, watch anime offered on Amazon’s Prime Video, which costs about half the price of a basic Netflix subscription.

Some of Netflix’s US-based rivals are also aggressively creating their own Asian content. Disney+ plans to green-light more than 50 original productions for the Asia-Pacific region next year, the company said.

“This is just the beginning of the battle for great content,” Luke Kang, president of Walt Disney’s Asia-Pacific, said in an interview late last year.

Netflix currently holds the #1 spot in many markets in Asia. But India, where it cut prices by as much as 60% on some plans, is a big exception.

The top player there is Hotstar, owned by Disney, which had 51 million subscribers in 2021, nearly doubling from the previous year, thanks to streaming rights to India’s most popular cricket league, according to Media Partners Asia. Amazon was number 2 with about 22 million subscribers. Netflix came in third with 6.1 million, up from 4.6 million a year earlier, the research firm said.

Both Hotstar and Amazon charge about $20 a year, which includes access to all of their high-quality 4K Ultra HD content. Netflix offers spartan mobile-only plans that are as low as $2, although their premium plans can cost as much as $10 per month.

“Everyone is talking about Netflix. Everyone talks about his shows. It is expensive compared to Amazon Prime and Disney,” said Deeksha Goel, 35, who lives in the northern city of Bareilly in the Indian state of Uttar Pradesh.

The price wars could mean a literal race to the bottom. Netflix has Vietnam all to itself for now with other big foreign rivals still preparing their entries. But in November, seeking more viewers, Netflix started offering free access to some of its most popular shows, including “Money Heist” and “Emily in Paris,” to people using Android smartphones. The service did not contain any advertisements, nor did it require individuals to enter payment information.

write to Jiyoung Sohn at jiyoung.sohn@wsj.com, Vibhuti Agarwal at vibhuti.agarwal@wsj.com and Miho Inada at miho.inada@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

www.wsj.com

Leave a Reply

Your email address will not be published.