Technology

Netflix & Others to Benefit From Asia Pacific Streaming Boom

Netflix NFLX has been able to grow its presence to 190 countries and win subscribers rapidly owing to growth in regional content, its award-winning portfolio and partnerships with top local content creators and artists.

These factors helped the company add 7.31 million paid international subscribers in fourth-quarter 2018 taking the total count to 80.77 million paid members. Additionally, international streaming revenues (50.3% of revenues) soared 35.8% year over year to $2.11 billion. Moreover, growth in international subscribers and revenues were higher than domestic subscriber and revenue growth.

As evident from its recent initiatives the streaming giant is now focusing on strengthening its footprint in Asia Pacific (APAC), including India. Notably, subscription video-on-demand (SVOD) services revenues are expected to reach $14.2 billion and SVOD services subscriber base is expected to reach 472.9 million by 2022 in APAC region, per eMarketer.

Let’s see how Netflix is placed in the APAC region, which is the fastest growing over-the-top (OTT) market, per eMarketer.



Original Productions Key Catalyst for Netflix

In a bid to capture the potential of APAC region, Netflix announced 17 original productions from Japan, Taiwan, Thailand, India and South Korea last November. This was in addition to the “100 new and returning originals” the company will launch across eight countries in 2019.

Additionally, Netflix has big plans for India, with the country’s 2019 slate including 12 local language original series and 20 local language films. Moreover, investments in Asian content will help the company attract and boost engagement levels from subscribers outside the region as they viewed Asian content the most, per management.

Investments in India are in the right direction for Netflix, as it is one of fastest growing OTT markets in the region after Mainland China and Japan, per a report from Asia Video Industry Association (AVIA). However, Netflix’s absence in China may hurt subscriber growth.

Can Low-Cost Plans Help Netflix Penetrate Better?

Apart from content, Netflix is experimenting with lower-priced mobile-only plans in APAC region, which enable it to reach growing mobile users and beat competition. Notably, mobile Internet penetration in APAC region is expected to increase from 57.2% in 2018 to 59.9% in 2019, per statista.

Reportedly, Netflix is testing mobile-only plans in both India ($3.63/month) and Malaysia ($4/month) and is making its service available at almost half the original price. These practices are in line with the company’s efforts to win 100 million subscribers only from India, a country which had 560 million Internet users as of January 2019, per statista.

We believe the strategy will help this Zacks Rank #3 (Hold) stock to win customers looking for OTT services in the lower tiers. Netflix may eventually upsell its services owing to content strength.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, Netflix’s mobile-only plans are not low-priced when compared to other well-established service providers in the APAC region. Let’s take a look at a few strong competitors.



YouTube Rides on Mobile Consumption

Alphabet’s GOOGL YouTube is the dominant player in the APAC region, excluding China, per eMarketer. The video platform has the highest penetration rate of 81% in the region.

The report attributed the growth to increase in the number of users consuming video on mobile devices. Additionally, freely available content in various languages and in many genres is a key catalyst. Moreover, low-budget content creators who wish to reach global audience often turn to platforms like YouTube, thereby increasing engagement on the platform.

The Zacks Rank #3 stock is expected to benefit from increasing viewership, especially from India, which is expected to increase from 203 million in 2018 to 285 million by 2021.

Hotstar: One of the Most Engaged Platforms

Hotstar, currently owned by Disney DIS after its acquisition of Fox, recently launched Hotstar Specials, to showcase its original programming content. Additionally, the service is in talks with about 15 filmmakers to produce exclusive content for the service in about seven different languages.

Moreover, the recently unveiled Hotstar VIP, one of the cheapest OTT service (Rs 365/year), showcases live sports, local content from Star India and web originals. Notably, Hotstar can support its content spend as it raised about $73.8 million from Star US to fight competition.

Further, Hotstar may get further attention if Disney decides to push its popular content to the platform from Pixar, Marvel, Disney, Lucasfilm. Disney currently carries a Zacks Rank #3.

Reportedly, the service was one of the top 10 downloaded apps in 2018 and had the highest engagement after YouTube in India.

Amazon Benefits From Diverse Portfolio

Amazon AMZN is boosting its Prime video content portfolio with regional and award-winning content. The company is expected to increase its content spending in 2019 and also has plans to increase the number of originals.

Amazon’s content slate contains a variety of sports offerings aimed at attracting users. The company recently brought Major League Baseball’s (MLB) for its Prime users. This apart, Amazon offers other premium sports content including, Premier League Football, Thursday Night Football, Premier League soccer and National Football League (NFL).

Moreover, the company’s sports portfolio will get a boost if its gets the 22 regional sports TV networks acquired by Disney from Fox. The Zacks Rank #3 stock with its vast global footprint has a notable advantage over other players.

Other streaming services that compete in the same space include HOOQ, Viu and iFlix to name a few.

Conclusion

Shift in content watching practices from traditional sources to digital platforms owing to low cost Internet services has created massive demand for content and thereby attracted many players into the streaming market, which is expected to grow to $124.6 billion by 2025, per Grand View Research. These present significant growth opportunities for the industry players.

However, the streaming companies are significantly burning cash to bring unique content and gain from ever-increasing demand for OTT services. Moreover, the common threat for all the players in the streaming market is the availability of pirated content particularly in the APAC region as illicit streaming devices are on rise per AVIA.

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