Is The Netflix Hangover Over?

Jessica Neal

Late last year, Netflix [NASDAQ: NFLX] entered the global markets making its Internet TV network available to over 130 countries. However, the company seems to be adjusting to a reality that things might not be as green as it saw it outside of the Atlantic.

NetFlix rattled the global stock market yesterday when it released a lower subscriber growth forecast for Q2 2016. The company predicts that it will add about 2 million new international subscribers in the next quarter. This in spite of the fact that its Q1 new international subscribers was 4.25 million way above above its forecast.

subscribers
Netflix’s international subscription growth is expected to fall next quarter

What exactly is happening to Netflix?

The answer is hydra-headed. On its investor relations page, Netflix described itself as ‘world’s leading Internet television network with over 81 million members in over 190 countries enjoying more than 125 million hours of TV shows and movies per day, including original series, documentaries and feature films”. However, the fact is that, although Netflix has gone global making its streaming services available to all major countries including Nigeria, the company is not yet an international/multinational Internet TV Network. Virtually 99% of its 15,000 titles in its library are not just in English language but are Hollywood contents and very few original series. Netflix is just producing its first sets of Japanese, French original series. The idea of a truly global Internet TV network is still far off.

Netflix CEO
Reed Hastings, CEO, Netflix. Source: hollywoodreporter.com

Also to be noted is Netflix’s top to bottom marketing strategy. Netflix currently has 81 million global subscription. Over 50% of these people are from the US. The company’s US influence is currently being challenged by Amazon’s new streaming service. It was expected that going global would have changed the fortune of Netflix, but its marketing is from the American lens. Netflix does not have a local/regional sales force to push for new subscribers. It only created sub-domains for all the 130 new countries with sponsored Facebook post and few programmatic banners pushing some of its new original series. If Netflix must get an upsurge in subscriber rate, it must change its current conservative strategy.

While Nigeria might not be a growth driver for Netflix, the Nigeria and South Africa are the major indicator of Netflix fortunes in the entire African continents. Netflix has not partnered with local telecom networks and data providers as to devise how its service can be easily accessed in the market. Individual carriers tried starting their own Netflix bundles, marketing the service with no support from Netflix. They have since soft-pedaled, abandoning it for their monthly data subscription campaigns.

 

So Is This A Good News for IrokoTV?

Since the launch of Netflix into more countries inclusive of Nigeria and major African countries, analysts have argued that the prospect for IrokoTV, a local streaming service launched by Jason Njoku, is gloomy.

iroko TV
Source: IrokoTV

Does the latest forecast portend good omen for IrokoTV. This is not really a yes. IrokoTV is currently nor doing well at the moment. The last data shared by its founder when the going was good in 2013, was about 30,000 paid subscribers. IrokoTV had faced series of challenges afterwards. From laying off over 100 staff to shutting down its offices in New York, the streaming service which mirrored Netflix is currently not putting any fight.

Jason
Jason Njoku, CEO & Founder, IrokoTV

IrokoTV has not being able to formulate a stable business model. For a continent where data is pretty much expensive, shutting down your website and moving to mobile viewing is not a wise decision. The short-lived boom for IrokoTV was driven by desktop users who watch films during working hours. Netflix, the leading streaming service gives access to their platform on any connected device with a screen.

What Can Netflix do?

A major challenge that Netflix will face in a country like Nigeria is the rate of churn (customers who drop off after their first or few subscriptions). For Netflix to avoid this, the company must have ‘boots on the ground’ such as customer service and a marketing team that connect with both networks and subscribers.

For a market like Nigeria, adopting an advertisement funded model where subscription rate can be crashed further might be a good way to go. But is Netflix ready for this paradigm shift for a market like Nigeria?

Featured image: digitaltrends.com