Seven hurdles Netflix must overcome before it is a global player

This week, Reed Hastings, CEO of Netflix, announced its launch in 130 more countries, bringing its total reach to more than 190 countries. This is a bold and courageous move to create a global SVOD platform.

However, Netflix is aware that there is still plenty of work to do in order to create a worldwide business.

I think that these are the seven obstacles that Netflix needs to address:

1. China

Nobody said that it was going to be easy. Netflix has stated that it will only have a limited impact in China and anticipates a relatively long wait before entering the market.

First, the company needs government approval (not at all easy for foreign media companies to gain). Next, it will also almost certainly need to partner with a local player – partly to satisfy the government and partly due to the difficulties for foreign media companies operating alone in China.

China also already has several well-established local SVOD players.

2. Local distribution deals

Can Netflix operate solely as a global player or does it need local help? Netflix has signed distribution deals with pay TV operators in several of its existing markets to aid subscription take-up, so we are expect this to continue in its new markets.

3. Local language

As well as the 17 existing languages, Netflix added Arabic, Chinese and Korean yesterday. Other major languages are certain to follow. Until then, how many Polish homes will be willing to subscribe to an English-language Netflix?

4. Local content

Hollywood TV and movie output certainly has worldwide appeal, but interest is also piqued by local content. Netflix will have to produce local content in its major markets to stimulate interest and also to ward of competitors.

5. Pricing

A Netflix subscription in India starts at INR500/month ($7.50). This is really expensive by local standards and compared to its competitors. Does Netflix need to introduce some flexibility here?

6. Payment

Outside North America, credit card ownership is not necessarily high. Netflix has already overcome this problem in Latin America by introducing prepaid cards [subscribers buy a card for a given amount from a retail outlet and input a code to access Netflix.

7. Broadband penetration

Fixed broadband penetration is growing fast, but it is still very low in some major markets (such as India). Mobile broadband penetration is growing even faster. Mobile SVOD has already taken off in the Far East and is spreading across the rest of the region and into Africa and the Middle East. However, data charges can be high.

Furthermore, the viewing experience on a mobile phone does not match that of a TV set (although there are ways to project content from mobiles to other devices with larger screens).

….All businesses face challenges, and I am sure that Netflix is well aware of the seven listed above. Netflix should be congratulated on its ambitiously expansion plans.

Simon Murray is principal analyst at Digital TV Research, the UK-based analysis and research house that tracks the OTT, pay TV and international TV sectors.