Regulation, Content, and Competition makes Netflix Trip in Asia

As it struggles to provide enough strong content to attract consumers amid tough local competition Netflix Inc is facing problems in several major Asian markets months after its global rollout. The company also faces many regulatory hurdles, underlining concerns about disappointing subscriber numbers reported this week.

The U.S. video streaming giant’s January launch into 130 new markets worldwide, including a slew in Asia, has been bumpy with complaints that programming libraries offered in many countries are far smaller than in the United States to delays in offering its signature “House of Cards” series in some markets due to rights issues.

For example, Netflix ran afoul of the film censorship board for carrying content deemed inappropriately violent or sexual when it launched in Indonesia in January. Netflix set up a local office and pay Indonesian taxes, demanded the communications ministry.

While declining to give details, Arif Prabowo, vice president for corporate communications at the carrier, told Reuters that state telecoms company PT Telekomunikasi Indonesia Tbk (Telkom) will continue blocking Netflix until it adheres to regulations.

Netflix is still available in Indonesia via wifi connections and other carriers.

“Services delivered over the Internet present new questions for everyone, including policymakers, and our intention is to comply with applicable laws and regulations,” said Jessica Lee, Netflix’s head of communications for Asia.

“It is all part of the journey as we roll out in different countries,” she said.

The results of Netflix suffered a first-quarter operating loss of $104.2 million for streaming video outside the U.S., partly because of higher marketing costs and the cost of dealing with these kinds of issues are reflected in its results. It also showed that it is earning less per subscriber overseas than at home.

Against 47 million in the U.S. at the end of the quarter, Netflix had 34.5 million international subscribers. It is unclear how many of its customers are in Asia.

The Netflix site offers fewer than 20 local TV shows or movies in South Korea where local content is popular and consumers have numerous streaming options.

“Korean Netflix’s library in terms of content is pretty thin,” said Jung Dong-yoon, a 29-year-old Seoul office worker and subscriber since January.

Well-known shows including “How to Get Away with Murder” and season two of “Better Call Saul” were missing – temporarily in South Korea as Netflix viewers this week discovered. The company said that the shows are submitted for age appropriate ratings by the country’s ratings board and would be back soon.

Programming rights are an issue globally.

Compared with 1,157 TV shows and 4,593 movies in the United States and 4,593 movies as of January, Netflix Australia, which launched service more than a year ago, offered just 443 TV shows and had 1,585 movies. According to Finder.com, the numbers were fewer than those available in Iraq, Haiti, Cuba and many other countries.

“With the traditional way in which rights to movies and TV titles are structured, there will be licensing restrictions and the goal is to get to a global library that is the same everywhere but that takes time,” Lee said.

It is still early in Asia for Netflix, Vivek Couto, executive director of consultants Media Partners Asia, said. He expects the company will eventually get “reasonable penetration” in markets such as India, South Korea, Singapore, Hong Kong, the Philippines, Thailand, and Vietnam and will ramp up local content.

(Adapted from Reuters)

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