With the release of the Netflix global player, the company is now available in 194 of the 197 countries worldwide. This is an amazing achievement, but is the company prepared to sustain and build a global audience?
I discussed last year how the only way Netflix would be able to meet its goal of worldwide access by the end of 2016 was by releasing a global player. That is precisely what Netflix announced on Tuesday at CES 2016. Reed Hastings, Netflix CEO, said the service was immediately available in 130 new countries. The only countries left without Netflix are China, where the company is seeking specific permission to launch service, and 3 regions where, under US law, it is illegal to do business: North Korea, Syria, and Crimea (subject to a dispute between Ukraine and Russia.)
One of the strategic imperatives for the company has been obtaining global licenses to content. Last year, Netflix’ content head Ted Sarandos said persuading content owners to license globally, rather than regionally as they have traditionally done, has been a major challenge. However, he made it clear at CES that this was now a requirement:
Every new dollar we spend is for global content and global rights. So when you see a show come on Netflix it will be available everywhere.”
That position seems to apply equally to content the company licenses from third parties and produces itself.
Achieving this global release almost a year ahead of schedule is an impressive achievement, though the company did have to cut corners a lot to get there. Much of the content in the global service is available only in English, and it only supports 20 languages (after just adding Korean, Arabic and Simplified and Traditional Chinese.) According to the press release the service is available for “one low price,” which certainly doesn’t reflect the differences in wages around the world. For example, the ability of people in the Congo to pay (where per capita GDP is $394) is vastly different to Qatar (where per capita GDP is $105,000.)
When questioned about producing different versions of movies and shows to suit different markets, neither executive appeared to have thought very deeply about it, with Mr. Hastings responding “we’ll have to see and we’ll have to learn.” This seems naïve as it is virtually certain that censors in China will demand edited version of marquee shows. I can’t imagine what Indian authorities will make of the lesbian lovemaking scene in the first episode of Sense8. This issue will quickly emerge as a critical one for the company, as countries react to the uncensored content by blocking the service.
It was not apparent how the company would market the new offering. Mr. Hastings said that he had heard from people everywhere asking when they would be able to get Netflix. However, as the company found in the UK, and is seeing again in Germany, real growth is hard work and requires local knowledge to execute well. The billing issue was also glossed over with a peremptory “we learned a lot in Latin America.”
What does the global release mean for the growth in subscribers? In the short term, Netflix will see a massive spike in those on a free trial. This should lead to a substantial bump in paying subscribers, though conversions from free to paying are liable to be much lower than the company has ever seen before. Beyond that, it is very hard say.
That said, it is clear that global availability sets Netflix apart from every other video service in the world. Where else can a premium content provider license content and see it instantly reach a massive global audience? Netflix is producing shows and movies all over the world, but while it produces the content regionally it expects the finished product to appeal globally.
Netflix is beginning to think and act from a global audience perspective, and this will exert an ever stronger pull on the rest of the content world to do the same.
Why it matters
With the release of the global service, Netflix achieved its goal of worldwide availability a year early.
However, the company made compromises and omissions to get there.
Some of these will surely come back to haunt the company later.
Notwithstanding these issues, the new worldwide Netflix will be a force driving needed change in the content industry.