By Katrina Woo & the STEBA Executive Board
Ever since its launch into streaming in 2007, Netflix has become a household name for over the top (OTT) services, taking the world by storm and dominating North America. However, as the industry evolves, Netflix has seen subscriber and revenue growth plateau in North America and Western Europe. Maybe, it’s time to set their sights on new horizons, particularly in the Asia-Pacific.
In 2023, Netflix is forecast to spend $1.9 billion on content in the Asia-Pacific region, representing a 15% increase in content investment from 2022 and 47% of total revenue. This increased investment is projected to result in 12% growth in revenue from the region, producing over $4 billion in revenue for Netflix. The Asia-Pacific is a gold mine for entertainment and media content, making it a particularly lucrative market for Netflix to break into, especially as their penetration rate in the Asia-Pacific is expected to grow by 24% by 2025.
This month, Netflix announced on local Twitter accounts that they will be “dropping monthly subscription pricing in more than 100 territories” in select Asia-Pacific markets. As pricing has seen gradual increases throughout the world, as well as the addition of cheaper ad-supported subscription tiers, “discounts for the basic tier range from 20% to nearly 60%” took many of Netflix’s competitors and audiences by surprise. Whilst it was a bold change, it is nonetheless incredibly smart because it enhances the service’s accessibility.
Firstly, subscription pricing has always been a point of contention for users; recently, audiences have become more price sensitive and motivated to cancel subscriptions because of price increases. This strategy in the Asia-Pacific not only takes into account that Netflix currently offers the most expensive plans in the industry (with 2 out of 3 of their plans taking the top 2 positions for monthly streaming costs in the US) but also differences in the economic demographics of the audience. In the countries this strategy targets, audiences have an average revenue per user that is lower than the US, which means that the same pricing model cannot be directly applied.
Secondly, it compliments their recent crackdown on password and account sharing between multiple users. The price drop could potentially “cancel out the extra cost to subscribers currently sharing accounts” and encourage them to move to tiers such as the basic ad tier, which is seeing a price cut in all countries experiencing the drop.
Lastly, the new pricing model parallels the content strategy focused on enhancing the travelability and diversity of content as media proliferates to and is enjoyed by global audiences. Hit Korean TV series like Squid Game had audiences not only craving for dalgona, but also to see more from the exciting world of entertainment in Asian storytelling. In a generation where the amplification of Asian and POC voices holds great weight and significance, the success of these shows is an indicator to entertainment conglomerates that diverse media is desired by international audiences.
Riding off cultural movements like the Hallyu-wave, Netflix’s localization strategy once again reigns supreme. Capitalizing on the enthusiasm of fans for Korean content, Netflix introduced 34 Korean film and tv series in 2022 and continues to produce content strategically positioned in alignment with audience interest. The uptick in market demand for Korean content has caused a ripple effect, with audiences demanding for more Japanese, Indian, and Indonesian titles. These content investments have “global impact” that has pushed some of these titles to be the top streamed globally and speaks to how Netflix’s identity as a global brand has allowed it to reach new audiences and levels of success.
With the geo-targeted price drops complimenting their existing and evolving localization strategy, Netflix is ultimately making their services more financially accessible to users in their growing Asia-Pacific market.
Lesson: It’s important to understand how to uniquely deliver to your audiences and when it’s time to focus on who! Netflix has smartly adapted their localization strategy to the Asia-Pacific region to make their services more accessible and complimentary to their evolving business strategy of enhanced password protection. Additionally, their active social listening and capitalization on audience excitement around Asian storytelling through localized content supports their trajectory of growth in the Asia-Pacific. Ultimately, these strategic and innovative moves have allowed Netflix to reaffirm their position as a pioneer and leader in the streaming industry.