In the past few years, the internet based video on demand(VOD) services have seen a major boom and one of the companies that acquired most of that grow was definitely Netflix. Nowadays, the company has around 50 million subscribers in the US alone and it reaches close to 50% of the entire US households. The true issue that Netflix has right now, however, is trying to achieve more growth is the world where the demand is starting to be at an international level.
Netflix has to grow internationally
That’s a given, without a focus on the international market Netflix can’t really achieve any more growth. At this particular time, the company has around 40% of its revenues from the international market alone and around 30 million subscribers can be found overseas. In addition to that, around 72% out of the entire 5.59 million net additions for the final quarter of 2015 came from outside the US.
Netflix knows this and banks quite a lot on the idea of creating original content that resonates with many people from all over the world. Even during the latest earnings call, they stated that Netflix wants to maintain a ratio of 50/50 ratio of original content over licensed content.
The focus on emerging markets is on elites
Since Netflix wants to spend close to 1 billion on original programming, this does add up to a 7% increase in the originals as well as around 17% of the entire programming budget, but even so, the rest of 83% of all content needs to be licensed.
But that’s where the true issue comes because outside of the US the pricing should also be different. You can’t expect people in Philippines or India to pay this much because you would be restricting the service only for the elites. These customers will need to pay a more competitive price if they are to succeed.
TV licensing does need to be more competitive
In the online era, TV licensing needs to grow and that’s what really happens right now. Netflix is focused solely on the online world but with licensing costs that are quite large and a monthly fee, there are still plenty of people that enjoy TV programming. Yet the true challenge of the latter is to deliver a more competitive way to monetize because if it finds that, people will most likely be attracted to it once again.
Pay TV does work nicely and removing commercials in order to deliver high-quality programming can be a great experience for both the station and user alike. Companies like HBO have successfully managed to do so but it’s only when this goes mainstream that Pay TV will work properly and deliver a good ROI. When it comes to Netflix, they still have to focus on the paid markets such as the US because if they do tend to focus on the emerging markets and offer a competitive pricing there then the brand focus can easily change. The only thing they can do right now is to maintain a good stance and lower their prices for those markets, all while offering more quality programming for markets like the US where pricing is higher!