Over-the-top (OTT) video player Netflix announced at the Consumer Electronics Show (CES) in Las Vegas earlier this month it has expanded its coverage to include 160 countries. It is likely that regional rollouts in the Middle East and North Africa (MENA), as well as those aimed at middle-income Asia Pacific, will have the greatest impact on paid-for video usage.
At CES 2016, Netflix CEO Reed Hastings announced an increase in the company's coverage by 130 countries. Consumers in many of these countries signed up for free trials, with services available to subscribers in three price tiers. Each tier differs in terms of image resolution (SD, HD or UHD) and the number of simultaneous streams available (1, 2 or 4).
Netflix's recent launch strategy for individual countries has been to seed original content investment ahead of launch, with typically 20% of its content localized for the market once the service has become established.
This current round of expansion will include little localized content for new country additions, which makes subtitling and dubbing of foreign content an essential part of Netflix's expansion plans. Netflix will face some local and regional competition, as well as issues with consumers' willingness to pay.
Netflix is an established player in Western markets, and English-language (particularly US) content has an international export value that exceeds that of other languages. However, Netflix does not necessarily face an issue-free expansion. We have carried out a SWOT analysis of Netflix in these new coverage areas.
In terms of strengths, Netflix benefits from a strong and familiar brand, to the extent that some consumers in markets where Netflix was unavailable used VPNs to access the service illegally – these subscribers can be directly converted into legitimate customers.
English-language content is understood in many parts of the world (and will particularly help Indian expansion), and Hollywood content will attract younger demographics, such as those aged 18–34, to the service.
Netflix has invested significantly in original content, as well as worldwide output deals with some studios, which will enable it to ensure a base level of attractive content selection in new markets.
In terms of weaknesses, Netflix will not have original content localized to many of its new markets, and its services will compare unfavorably to local solutions as a result. Language issues may limit appeal to the mass market.
Netflix is dependent on high-speed broadband availability (mobile or fixed), as well as the affordability and reliability of such services.
Netflix's target audience is relatively limited – their subscriber base primarily includes consumers attuned to international content, with discretionary spend for OTT video.
As for opportunities, Netflix plans to appeal to local, original content creators in order to expand its original content programming in each region. During the keynote, chief content officer Ted Sarandos emphasized this point: "We hire strong creatives and let them create worlds.”