Netflix to boost Asian push with original content

NETFLIX LAUNCHED its plan to focus on strengthening its Asian market as it announced 17 Asian original productions from Korea, India and Southeast Asia with more on the way, the streaming service’s executives said in a two-day conference in Singapore.

“We’ve got plans to pretty aggressively program throughout the region, planning 100 regional productions — series, specials and films — throughout Asia,” Theodore Anthony Sarandos Jr., chief content officer of Netflix, told the media during a press briefing on Nov. 9 as part of the conference in Singapore.

He added that they’re just getting started in Asia as they continue to look and “tell stories that are really, really locally relevant for each country...and that’s really been our strategy: to create the best, most authentic shows in as many places as we can in the world.”

During the two-day conference dubbed See What’s Next Asia, Netflix announced 17 Asian originals including Thai-language originals, five animated series (which includes an animated adaptation of Budjette Tan and Kajo Baldisimo’s Trese graphic novel set in Manila), Indian originals, South Korean originals (this includes zombie historical epic, KINGDOM, which despite having a Jan. 25, 2019 premiere date, has already been renewed for a second season) and a Chineselanguage original from Taiwan (Triad Princess).

The newest titles are welcome additions to Netflix’s first foray into Asian programming which includes the South Korean variety-comedy series BUSTED! India’s crime-thriller Sacred Games and Japan’s animated series, DEVILMAN crybaby.

Next year, Mr. Sarandos said they will be “most definitely” be increasing their content budget which was pegged at $8 billion this year, though an assessment by Goldman Sachs in July pointed out that the streaming giant’s content spending will land more between $12 to $13 billion this year with 85% spent on original programming alone.

THE FOCUS ON ASIA

Netflix ended the third quarter of 2018 with 137 million subscribers, up almost seven million from the quarter before. Of the 137 million subscribers on the service, 58.46 million are from the United States, according to statistics portal, Statista.

This means that much of Netflix’s subscribers are now outside the US, though Media Partners Asia, a provider of advisory, consulting and research services, noted in a report in April that Asia “plays a modest role in the company’s growth story” as it contributes less than 5% of the global base at the end of 2017.

A number Wilmot Reed Hastings Jr., Netflix CEO, has belied this, saying, “I wouldn’t listen to the analysts very much.”

“Asia has been a great market for us. You can see the acceleration in our overall numbers: several years ago we were only growing by ten or 20 million new members per year, now it’s 25-30 [million] and that’s really a contribution [from the region],” Mr. Hastings said in a press conference on Nov. 9.

Netflix entered Asia and much of the world at the start of 2016.

But the focus on Asia isn’t contained on growing the subscribers within the region as Netflix observed that there is a big market for Asian content outside Asia.

“More than half of Asian content hours viewed on Netflix this year are viewed outside the region,” Mr. Sarandos said in a presentation during the conference.

“So we have confidence that our upcoming slate of Asian productions will find fans in their home countries and abroad,” he added.

THE COMPETITION

In August, Netflix reported that it released 88% more programming for 2018 than it did for the same period in 2017, according to Fortune. But this doesn’t mean that Netflix will, if ever, stop being an aggregator of content and focus on original-only programming.

“Aggregation is an important part [of the business]. We’re not trying to be Netflix content only, we’re trying to be customer-pleasing as the main thing we focus on,” Mr. Hastings said, explaining that studios and producers like Disney “might pull back” their content from the Netflix service — that’s why the company needs to invest in their own content to differentiate themselves from their competitors like Amazon, HBO and the soon-to-be-launched Disney+ service which is expected to be rolled out in the US in late 2019.

“We’re used to competition,” Mr. Hastings said. “Amazon has been competing with for ten years and HBO for 14 years.”

“It’s just up to each service to try and do great content. And if all of us are fighting for more consumer attention, then the consumer has many choices...and it does force us to do really great creative work because HBO, Disney, they are really impressive,” he explained. (He also noted as an aside that the “Disney service looks great” and he will probably subscribe to it).

Netflix’s focus on aggressiveness on original content has created a negative cash flow that is expected to be between $3 to $4 billion in 2018, larger than 2017’s $2 billion, according to the company’s letter to its shareholders in January 2018 but Mr. Hastings said it is not a cause for concern as it is a consequence of being in “hypergrowth” when it comes to producing original content.

“Something like the internet only comes by once in 50 or a hundred years — a change like this. So our investors are pushing us to go faster and faster and we need to be producing creative content... think of it as a minor thing for investor standpoint and a great thing for consumer standpoint because we produce a lot more than we would otherwise,” Mr. Hastings explained.

“Someday, the growth will be slower and we should be cash flow positive but while we are in this hypergrowth around the world and that does consume cash and our investors are comfortable with that,” he added.