How Netflix is tapping into emerging markets

Netflix's venture in emerging markets shows us the importance of local knowledge and global partnerships.
24 October 2019

Netflix is entering emerging markets with valuable insights from local partnerships. Source : Shutterstock

Netflix started as a DVD-by-mail rental service in the 90s, delivering striking red envelopes to American homes.

It might be hard to imagine seasons of Stranger Things, Black Mirror, or House of Cards arriving in mailboxes; the streaming giant, as of today, has 196 US-language TV series in its library waiting to be binge-watched. 

Even in light of that might, the company has experienced a loss of 130, 000 paid subscribers in its home market, and fell far from the targeted 5 million new subscribers for the second quarter of 2019.

The firm is recognizing that its unique selling point is wearing off, thanks to the rise of imitation services from the likes Amazon Prime, Hulu, Disney plus, and Apple TV+ offering on-par, big-budget content, and services to the Western market.

Hence, to draw up the number of subscribers— and overall revenue as a result— Netflix had set its sight on emerging economies in the East. Since its voyage, the streaming service saw a rise (31 percent) in average streaming paid memberships and a revenue of US$5.2 billion for the third quarter was achieved.

For companies looking to stamp their presence and expand to emerging markets, there are certainly some pointers they could take from the streaming site’s strategy.

Emerging market insights  

Netflix prides itself on ensuring that user experience (UX) is top-notch by using algorithms to track user habits. The algorithm captures the interests of a user and forms a portfolio, recommending similar content to the user.

At the same time, machine learning (ML) updates the portfolio every time the user engages with content from Netflix, constantly enhancing its personalized recommendations.

In simple terms, algorithms help Netflix understand what an individual user likes; on a larger scale, this concept can be adapted to identify what an entire region or nation would like, and the multi-faceted technology is capable of doing so.

Therefore, data insights and analysis— and action off the back of it— is behind the move to create more original content blended with local culture and languages to achieve a greater share of subscribers in new markets. 

“To date, we have globally released 100 seasons of local language, original scripted series from 17 countries and have plans for over 130 more in 2020,” the company said

“We also plan to expand our investment in local language original films and unscripted series.”

Aware that accessing a global market means adjusting for different consumption habits, Netflix released a mobile-only subscription plan in mobile-first nations like India and Malaysia with the lower price of RS199 (US$3) and RM17 (US$4) per month.

Besides the affordable price, Netflix’s encoding technology, which fits content to entry-level mobiles and flagship mobile devices, casts a broader net in a new market. 

Partnerships and collaboration a winning combination

Setting up in a new country can be costly and it is usually larger firms with substantial investment and ample resources that can embark on this endeavor. However, seeking support in partnerships, both in terms of technology and unique insights they can provide, can be a game-changer for many startups or SMEs looking to scale up internationally. 

Partnership growth initiatives have been a major contribution to the success of Netflix’s penetration to new markets. For example, the company collaborated with Vodafone to offer viewers in Ireland video-on-demand services with a dedicated Netflix button built on its remote control.

Last year, Netflix formed a partnership with Telefónica (a large integrated telecommunications service in Europe and Latin America), enabling customers to pay Netflix subscriptions via the telecommunications bill. To add on, customers can choose a mobile data plan which includes Netflix services without additional charges.

Similar strategies have been used when it recently launched its mobile-only subscription plan in Malaysia by developing partnerships with local telecommunications companies to reach out to potential users.

“Every partnership is slightly unique, and it’s a great opportunity for us to grow and to partner with these local organizations,” Ajay Arora, Director of Product Innovation at Netflix, told TechHQ at a press event in Kuala Lumpur, Malaysia. 

Comprehensive market research, which involves time and groundwork, is essential but can be challenging for many companies looking to venture into emerging markets. Therefore, partnerships with local organizations may lay a solid foundation during expansion to new markets.

In brief, new technologies are connecting and bringing communities together, making collaboration easier and entering new markets that much more feasible, and lucrative.