TBI Tech & Analysis: How Netflix’s mobile strategy could pay off in developing markets

Netflix drama ‘True Story’

Omdia analysts Constantinos Papavassilopoulos, Jun Wen Woo and Juan D. Villegas explore why Netflix is looking to tap into mobile-first markets with ‘free’ access to some of its content.

Developing markets are largely characterised by low broadband and high mobile penetration. Therefore, mobile operators play a greater role in internet connectivity in these markets, particularly as data and devices are becoming more affordable.

The fixed broadband market in developing markets, including in Asia & Oceania, Africa, the Middle East, and Latin America & the Caribbean, is lower than 60%, while mobile connection penetration in these regions is more than 80%.

The online video market has been growing since Netflix launched globally in 2016; however, the uptake has been mainly focused on more developed markets and many streaming services are still struggling to capture a significant number of subscribers in developing markets.

Netflix strategy

Netflix launched a free plan in Kenya and Vietnam in September and December 2021, respectively, with no ads, but a limited catalogue and features, allowing consumers with an Android phone to try out Netflix for free. Unlike before, credit card details are not required for sign–up.

Based on Omdia’s Smartphone Spotlight Service data, 99% of smartphone operating systems in Kenya and 82% of that in Vietnam are Android. Netflix is targeting the majority of smartphone users in these markets with this free plan.

To date, Netflix has largely been acquiring its subscribers from the more developed markets. Developing countries will be Netflix’s primary focus to grow its subscriber list. Nevertheless, Netflix still struggles to capture a significant market share in developing markets in the region owing to challenges in these markets, including a low propensity to pay for online content and online piracy.

Therefore, Netflix is hoping to acquire more users in these markets by offering a free plan, which is something different from its usual strategy. Netflix hopes that the Kenyan and Vietnamese public will be enticed by the content on offer and choose to upgrade to a paid service to access the full content library.

The launch of this free plan is an experimental attempt from Netflix to get back on a higher growth schedule and capture more market share.

It seems likely that in terms of subscriber numbers alone, this free plan will achieve that goal quickly. However, the arguably more important questions around paid members and revenue are a bit trickier to answer.

The excerpt above is taken from the Omdia report ‘OTT Strategies to Acquire Subscribers in Developing Markets’ – available here – and was written by Constantinos Papavassilopoulos, Omdia’s principal analyst, Jun Wen Woo, senior analyst and Juan D. Villegas, research analyst for TV & Online Video. Omdia, like TBI, is part of Informa.