Netflix heads East and the Philippines should take note

MANILA, Philippines – Internet movie and TV subscription service Netflix is available in many countries in the West. Its launch in Australia, however, marks its first step towards the East, with the company planning inroads in Japan by fall 2015.

In February, the company disclosed plans to expand into Japan, including opening a regional office in order to work with local TV and film creatives.

It then launched in Australia and New Zealand simultaneously on March 24, giving a free one-month trial for new members. Their monthly subscription would start at AU$ 8.99 for Standard Definition, AU$ 11.99 for high-definition and AU$ 14.99 for 4K ($6.82, $9.09, and $11.40). New Zealand would have NZ$ 9.99, 12.99, and 15.99 ($7.48, $9.72, $12), respectively.

In an interview with Gizmodo Australia, CEO Reed Hastings stated his reason why he’s not afraid to expand, and other considerations in entering the Australian market.

“Our challenge in every market is to get across this idea that you get to watch whenever you want.” Hastings said, referring to Netflix’s on demand model.

He also likened traditional TV to fixed line telephones, saying “it will still be around in a bunch of homes but it will go down and down and down.” News and sports will still be on TV, mainly the reason why people will not get rid of the format, but he was decisive in saying that for entertainment, “it’s all going to be on demand in 10 years.”

On Demand

The model is not new to the Philippines. iWanTV, an ABS-CBN subsidiary, has been running for quite some time now. Recently, HOOQ, an Asian start-up that is a direct threat to Netflix in Asia, was launched locally through Globe Telecom.

Both platforms, however, only show what’s available, whereas Netflix now creates original shows.

“We look for something that’s unusual, [something] that people get excited about...That fresh angle.” Hastings said about Netflix’s original content.

Apart from original content, Netflix also distributes titles from local markets like Australia’s Mako: Island of Secrets and Norway’s Lilyhammer, both being shown in all Netflix territories.

Its arrival in the Philippine market would be very much welcome, providing an alternative taste in entertainment that’s dominated by the extremes of local and Hollywood shows. It would also certainly steer a lot of people from relying on pirated content and instead, relish on legal, high-quality videos.

Piracy

Some Netflix originals have gained popularity even in countries where the website is not available, leading to distribution of pirated copies of its episodes in file-hosting sites.

“The key thing about piracy is that some fraction of it is because [users] couldn’t get the content.” Hasting said. “That part we can fix. Some part of piracy however is because they just don’t want to pay. That’s a harder part.”

For Hastings, the first step should be to accommodate all the willing-to-pay people by making Netflix global.

This would mean lifting off regional exclusivity in all titles (not just Netflix exclusives or originals) so that everything would be available in all territories. It would remove a reason for people to pirate content. It also explains why the company is now heading east.

In the meantime, the company has to rely on governments to tackle piracy. The Communications Alliance in Australia recently published a ‘three-strikes’ policy, allowing rights holders to “take direct copyright infringement action against an account holder” in question. Guilty offenders may face harsh penalties in court.

Australian Communications Consumer Action Network CEO Teresa Corbin said that it was fitting, for “disconnect from the internet or speed throttling are not proportionate methods to tackle that problem of online copyright infringement.”

Data caps

But it may be a while before the streaming pioneer comes to Philippine shore. Its Australian launch was deemed late by some parties, owing to the fact that Foxtel – an Australian pay television company – acquired the first two seasons of House of Cards in 2013. They saw that as a chance for Netflix to take on the Australian market but Hastings said that the country’s average data caps were to blame.

“We’ve been watching the Australian market for a number of years,” he said. “Five years ago, most of the residential plans had fairly low [data] caps”

Citing Canada as an example, he shared how the country had a ‘really low’ data cap of 10GB overall when Netflix first set foot. That was indeed meager compared to the 500GB plan in Australia that costs an average of AU$ 50 ($38), or an unlimited plan for AU$ 90 ($68).

Locally, a Php 2500 plan, equivalent to AU$74 ($56), will get you 16-50GB of data per month. Internet service providers (ISPs) defended data caps, with Globe’s CEO Ernest Cu saying that it was not a legal issue but a marketing one.

“It was always there in the contract, [customers] signed with us that [Fair Use Policy] will apply. We weren’t specific about the FUP, but it has to do with capping on a certain level of usage. It’s always been there.” Cu said in interviews with Newsbytes.ph in 2014.

“There’s no reason for data caps.” Hastings said. “We want to make the Internet unmetered. Period. The capped model is antiquated: we want to make it about speed. 10Mbps will cost more than 1Mbps and 50Mbps will cost more than 10Mbs and that makes sense.”

Netflix started out as an online DVD rental company in 1997. It started its movie streaming business in 2007 and expanded into original content in 2013, starting with House of Cards. – Rappler.com

AU$ 1 = Php 33.95