Does Netflix have a plan to fix its subscription crisis in Asia

If people in India are irritated with Netflix, there is a reason to be. Its content stack has just not kept pace with the likes of Disney Hotstar and Sony Liv. Also, Netflix has been unable to create a niche content offering for the Indian population and its current content offering is still too generic. Netflix has been one of the leaders in the NASDAQ fall and has lost more than 60% of its market cap since last year. Now, Netflix is looking at Asia as the laboratory from where it will launch a grand plan for templating across emerging markets.

There are some features that will remain unique to Asia. Even as Netflix is cutting down on cash burn, its investments in Asia will keep growing. It will also sink top dollars into the production of local films and series that are straight jacketed to the local Indian market. Its low priced mobile-only membership will continue in Asia. However, it will also look at larger partnerships with wireless operators and digital payment companies for wider and deeper reach. Asia, will be the growth driver at a time when the US and EU markets are saturating. 

As mentioned earlier, Netflix also sees Asia having sharp similarities with other emerging markets like Africa and Latin America. Hence, the learnings can be easily replicated in other markets, once the model is perfected in Asia. Netflix has a problem because it saw a contraction in customers for the first time in the April quarter and the June quarter is likely to be a repeat of the same. Actually, Asia is fairly large and nearly 15% of its 221.6 million subscribers globally actually come from the Asia Pacific region, so it has critical mass.

More importantly, Netflix sees most of the growth in numbers coming from Asia Pacific although revenue per account may still lag US standards. For instance, in the second half of Calendar 2022, Netflix expects to add about 6.8 million members of which close to 80% of the incremental membership will come only from the Asia Pacific. There have been more sensitive issues. In India, “A Suitable Boy” raised major cultural issues while in Vietnam, Netflix had to remove a show after a map it showed apparently violated sovereignty laws.

The challenge for Netflix in Asia is that its customers in Asia are among its lowest-value customers. It would need exponential growth in subscriptions to make a significant impact on revenues. In the Asia Pacific region, the Average revenue per membership fell 5% to $9.21 a month. In contrast, the average revenue per membership was up 5% in the US and Canada at $14.91 per month. But, then in a mass market like the Asia Pacific, Netflix has to be prepared to play for the long haul and forsake some of its short term gains.

The bigger challenge for Netflix is the competition from global giants and local players. For instance, globally Amazon and Walt Disney have given Netflix a run for their money. Then, there are local companies like VIU in Southeast Asia, which has overtaken Netflix. Even in India, the players like Sony Liv are giving a tough time to Netflix. Even in Asia there are richer countries like Japan and Korea plus emerging markets like Thailand, Indonesia and India. It needs to grow across all these market segments.

In India, Netflix has about 55 lakh subscribers and it must take the subscriber base to 85 lakhs for the eventual numbers to become meaningful. In India, even the market leader by a margin, Disney + Hotstar, has seen a drain in the number of subscribers, so Netflix will not have it easy. One thing that Netflix is trying is to offer a much wider array of payment choices in Asia compared to competitors, since that can be a differentiating factor here. Advertisement revenues is also part of the plan for the Asia region.