Netflix demonstrates a high rate of expansion in the markets of India, Japan, Indonesia and South Korea. Business growth contributes to the duplication of content in local languages, creating original content for a specific market and the partnership with the telecommunication companies providing mobile Internet services.
Will increase the price of Netflix stock after the disappointing results of the quarter?
Netflix shares (NFLX) dropped after October 20, the company published a quarterly report with only 2.2 million new subscribers. At the same time, over the last week, stocks rebounded and the price per share of Netflix rose by 59%.
The company’s management and analysts have referred to the fact that in the previous two months, the increase in the number of new subscriptions was a record, because the users have chosen Netflix as entertainment, alternative cinema closed during a pandemic.
It seems that Netflix sees no problem with expanding its user base since last week, has announced another increase in the price of a standard subscription package in the US for $1 per month, and premium for $2 per month. Thus, even if the rate of adding new subscriptions will decline, a higher subscription fee, the high level of involvement and a very low bounce from subscriptions will lead to increased revenues and profits for Netflix in the current and future quarters.
The rapid growth of Netflix in the markets of Asia promise great potential
In the comments to the last quarterly report Tony Samakoski, Vice President of Netflix’s development in the Asia-Pacific region, said that almost half of the growth of new paid subscriptions fell on the Asia-Pacific region – the largest share among all regions.
The reason for the success is the addition of subtitles and duplication of the content in regional languages such as Hindi, Malay, Korean, Japanese, Thai and Bahasa Indonesia. Netflix has also made the app interface is available in local languages. This diversity none of the international streaming service that Netflix provides an important trump card for the conquest of markets and competition with local companies.
In addition to duplication of existing content, Netflix continues to invest in the creation of new original content for specific markets. So, for the Indian market over the period from 2019 to 2020, Netflix spent $400 million to develop original content and licensing content from other companies.
Netflix has made over 40 films and shows in India, including drama in Hindi “Sacred games” with participation of famous bollywood actor Saif Ali Khan.
Similar steps Netflix has taken in South Korea, where, as of 30 September, there were 3.3 million paid subscribers.
The basis for the growth of Netflix in India and other regions is the spread of high-speed Internet and partnerships with mobile operators.
According to EY, India has the second largest number of Internet users after China 570 million and the annual growth is about 13%.
“Over the past four years, the Indian market has undergone a fantastic transformation from the point of view of Internet access and it cheaper with Reliance Jio,” said Samakoski, referring to mobile Internet services offered by Indian Telecom giant, Reliance Jio. “It was great for us because we really benefit from an excellent infrastructure, so that people unable to access Netflix”.
The availability of a Netflix subscription in one package tariff plan with Internet is also the basis of demand growth. In the markets of India, Malaysia, Indonesia, the Philippines and Thailand, a subscription to Netflix on a mobile tariff can cost users less than $5 per month. This is very different from the Netflix premium prices in markets such as the US, where a standard subscription costs about $14.
Netflix has said it will continue to invest in such markets as Japan, (South) Korea, India, Indonesia, as it sees significant potential for their growth.
Market experts also say the presence of Netflix’s practice of collecting huge amount of user data that gives the company an understanding of what content users like, and allows you to create original content “on demand”.
Back in 2010, Netflix had 20 million subscribers, and now have the company of their 195 million. Even if the future annual growth will match the conservative projection of 10%, according to RBC Capital analyst Mark Mahoney, by 2030, Netflix can reach 475 million to 525 million subscribers.