Competing with local streaming services
Choosing something to watch on television used to be a fairly straightforward task: you looked at the selection of DVDs available on your shelf and picked one. Today, choosing something to watch could take almost as long as watching the actual film or TV drama – streaming services mean that anyone could have hundreds and thousands of titles at their fingertips, anytime, anywhere.
When it comes to the worldwide video streaming pond, American entertainment streaming conglomerate Netflix is the big fish. Southeast Asians were hearing about Netflix’s original productions – from House of Cards to Chef’s Table – even before they could officially access the service’s offerings – without the use of a Virtual Private Network (VPN) to access geo-locked content, that is.
Then Netflix took a big leap forward and in January launched globally, gliding into the market in 130 countries all at once. Suddenly, millions of people in the region could watch Orange is the New Black on their iPads and TV screens.
Its introduction to Southeast Asia saw the business soon competing with a plethora of local streaming services for a tantalising piece of the pie: it has been reported that annual video streaming subscriptions in the region could hit $200 million by 2021.
It was a brave move, even for a company of its size. Hooq and iFlix, launched in mid-2015, are both dominant in the Southeast Asian region. It is not hard to imagine why: both streaming services offer an even mix of local and Hollywood content, and come in far cheaper than their US-based counterpart. While Netflix costs $7 to $10 per month, Hooq or iFlix only cost $2 to $3 each. Subscriptions to Netflix can also only be processed via credit card, thus further reducing the pool of potential customers in a region where credit card penetration rates can be low.
Jessica Lee, vice-president of communications for Netflix in Asia, acknowledges the limitations of credit card-only transactions and told Focus Asean that this issue will be “one of the ways we keep improving and finding ways to meet the needs of these emerging markets as the service matures over the long term”.
The company does not share its subscriber figures, but says it added six million subscribers across the world following its launch in the first quarter of 2016. The second quarter saw another 1.7 million subscribers sign on.
Netflix is offered only in English in Southeast Asia, but Lee says there are plans to localise the service, from the user interface to the dubbing or subtitling of content. But these things take time.
“If you can imagine, our library has thousands and thousands of titles. It needs time to get to a critical mass. If not, if you launch a local service and [a subscriber] goes in there, and out of every ten films [they] choose only two have subtitles, people will not be satisfied with that,” Lee explained.
On top of providing local languages, the company is also investing in providing more local content, or at least content produced within the region. Among Netflix’s upcoming highlights from Southeast Asia is First They Killed My Father, a film directed by Hollywood darling Angelina Jolie that is based on the memoir of a Cambodian human rights activist who survived the genocidal Khmer Rouge regime between 1975-79.
“This is all part of building that local platform, that local shows can come on,” said Lee. “We’re trying to bring the service closer to Singaporeans, or Malaysians, or anyone in the region.”
But are local programmes really Netflix’s biggest draw? Lee doesn’t think so. “People don’t pay $10 a month for us to localise,” she said. “They want to see some local content, but they actually pay that for our original – I would call it our ‘blockbuster’ – content.”
The ubiquity of Netflix
Even before Netflix arrived in Southeast Asia, people were trying to access its content using VPNs. In highly connected cities where reviews and articles from the US are readily available, Southeast Asians hankered after Netflix original content long before the company launched globally. Now, Netflix originals like Stranger Things, Bloodlines and Unbreakable Kimmy Schmidt are available globally, precluding the need for VPNs or surreptitious bittorrents.
Some of this original content might be racier, or more violent, than Southeast Asian media regulators might be comfortable with. Netflix met a roadblock in Indonesia, where it was blocked by the country’s largest internet service provider after concerns were raised over explicit content.
But regulators have admitted that streaming services like Netflix create a conundrum for them, as legislation has not yet been updated to reflect such offerings. For instance, Indonesia’s law on film censorship refers to the content that has been imported into the country – which Netflix is not doing.
“Honestly, we are confused. Those movies are broadcast in Indonesia by a foreign company using servers located in foreign countries. Common movie media such as celluloid, CDs and DVDs are clear enough, but Netflix is not,” Ahmad Yani Basuki, chairman of Indonesia’s Movie Censorship Agency, told thejakartapost.com in May.
In Singapore, the Media Development Agency issued a circular in July saying that R21 content would be allowed as long as the services provided baseline safeguards such as age verification measures, access controls and age ratings to advise consumers.
Bringing video content to so many consumers at once is a mammoth task. Southeast Asia, with its range in internet reliability and speed, brings its own set of challenges.
This is where Netflix’s background as a technology company comes in. It has developed its own content delivery network, known as Open Connect, which helps local telco companies save on bandwidth. Open Connect Appliances also cache Netflix content on servers in more than 1,000 locations around the world. When Southeast Asian viewers select a show on Netflix, they are not trying to download it off a server located hundreds of thousands of kilometres away in Netflix’s US home base; they are loading it off an Open Connect Appliance comfortably housed in Singapore.
But having a nearby server is not always enough when you are on the go, particularly in countries where data connectivity on mobile is not always the fastest. So Netflix also offers adaptive streaming, which not only gives users the choice of what bit-rate they would like to stream at, but can also automatically adjust the streaming quality as it detects the strength of the connection.
It’s an impressive marriage of technology and creative content, one that Netflix hopes will be able to convince Southeast Asians to pay for instead of cheaper competitors. But Lee is confident that when it comes down to the crunch, their vast variety of global content will hook people in:“We’re going to go into 600 hours of original programming, up from 450 hours in 2015,” she said. “We’re really changing entertainment.”