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Netflix versus iflix in the Southeast Asian market

Netflix versus iflix

While many analysts expect Netflix to dominate the Asian landscape, as it has done in most of the western world, they should be mindful of a number of problems the video streaming conglomerate will face; namely from companies like iflix. Iflix is the largest subscription video streaming service in Southeast Asia. It is likely to retain this position for the next few years due to its regional partnerships, affordable pricing model, device strategy, and knowledge of Asian culture.

Last January during CES Netflix announced it would expand to a further 130 countries worldwide, including the much sought after area of Southeast Asia. There the company will compete against some of the local subscription services, such as iflix.

Iflix launched in May 2015 in the Philippines, and within 6 months had already recruited one million subscribers. It now has over 2 million. Despite this impressive performance, many people expect Iflix to fail. But so far it hasn’t, and doesn’t look likely to anytime soon. There are four primary reasons acting in iflix’ favor:

Regional Partnerships:

Netflix was released in 130 countries in January, and no one was surprised by its omission from China. However, what did surprise some analysts was its ban in Indonesia. Telkom, the region’s main (and practically only) ISP provider announced on January 28th that it had blocked Netflix earlier in January. It did this, according to The Wall Street Journal, based on claims that Netflix did not meet existing regulations. Iflix on the other hand has been a partner of Telkom since June 2016. This gives it access to the 250 million people in Indonesia, and it is working with Telkom on releasing content deemed appropriate by the state owned company. When speaking about Netflix, Dian Rachmawan, director of consumer service at Telkom, said:

“We’d like for them to obey the rules in Indonesia […] If we partner directly, we can manage Netflix through an over the top platform that Telkom has.”

So far Netflix hasn’t agreed to do this. However, other subscription VOD services, like Hooq, have not been so reluctant.

The violence and explicit images depicted in many Netflix dramas, and lack of parental controls contributes to them not meeting the regulations. A lack of knowledge of the area and no preexisting relationships with local providers doesn’t help either.

Iflix, on the other hand, has deep roots in Asia. It has received funding from a number of large SE Asian groups, including the Philippine Long Distance Telephone Company.)

Netflix will work to improve this situation over time, but currently it is a major barrier it will have to solve if it wants to be legal and available to southeast Asia’s largest population.

Affordable Pricing

Iflix’s movie collection is available for a subscription fee of US$2.93 a month, making it cheaper than its competitors. Netflix’ basic monthly subscription in Indonesia is US$8.19, while Hooq’s is US$3.72. This fact alone should make Iflix the dominant subscription model in Asia. After living here for months, it is clear to me that the $5 price difference is huge. The majority of South-East Asians live on less than a dollar a day. Asking them to pay almost three times more than this to stream House of Cards in HD is just unreasonable.

Additionally, Netflix continues to tier its pricing. The lowest tier is $8.12 per month for a basic package. The highest tier is $5 more and provides Ultra HD premium content. This pricing model, however, is unattractive to most Asian users. This brings me to my next reason…

Device Strategy

Thailand is a mobile video market

Thailand is a mobile video market

Netflix targets users who will watch television from a high definition monitor, such as a household television or computer. While many households in Asia have a television it is rarely connected to the internet. The primary way that users stream video over the web in Southeast Asian is through a smartphone. I see street food vendors in every city I visit watching television programs on their mobile phones. Even in the remote Northern Thailand regions populated by the long neck tribes, I saw small children no more than six years old watching shows on their phone while they were selling ceremonial beads.

Mark Britt, the CEO of Iflix, understands this tendency of Asian users to stream through their phones and stated that he intends to tap into the “2.5 billion people who have smartphones” in emerging markets. Meanwhile Netflix is focusing on “bringing more and better content”. Which brings me to the next reason.

Knowledge of Asian Culture

iflix focuses on local content

iflix focuses on local content

The previous three points show a lack of understanding of the Asian market and culture by Netflix. This problem shows up in other areas of the company’s strategy. For example, choice of programming.

According to Reed Hastings Netflix is focused on creating original and universally appreciated content. Unfortunately, shows such as Narcos, House of Cards and upcoming shows such as The Crown all cater to a decidedly western audience. They have some upcoming Eastern shows, such as the Korean movie Osha. But this selection pales in comparison to the swathe of shows available from iflix. According to a piece written by Nadine Freishland for TechinAsia.com:

 “Iflix has repeatedly pointed out that it intends to cater to Asian viewers’ preferences and is even working on original content for this region. It also allows offline viewing of up to 10 titles, which is another nod toward localization. In Southeast Asia, not everyone has access to a stable internet connection all the time, which makes offline viewing attractive.”

Not only has Iflix embraced the partnerships, pricing, devices and content desired by the southeast Asian market, but it also continues to adapt to the changing region. When asked if iflix is worried about competition from Netflix, Mark Britt responded with:

“Not at all, iflix is at the other end of the spectrum, so we don’t think about big global domination, we think about emerging markets.”

It appears this strategy is working, because iflix has just passed 4 million users less than fifteen months after launch. If Netflix wants similar results it would do well to learn from this strategy. However, for the moment it looks like the company is committed to its current course and could be headed for more trouble.

Lloyd Dixon, nScreenMedia

Lloyd Dixon, nScreenMedia Analyst

The author of today’s piece is a new voice from nScreenMedia. Lloyd Dixon will be contributing occasional stories as our roving analyst in Southeast Asia. This piece was filed from Pai in Thailand.


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