This is expected to be primarily driven by a recovery in the Australian market, “robust growth levels in the developed East Asian markets of Japan and Korea, where revenue per user is often high; and material gains and contributions from emerging markets of India, Indonesia, the Philippines and Thailand,” said regional research and analysis firm Media Partners Asia (MPA).
The Asia-Pacific region is an important region for Netflix, given that Netflix’s home market of the US and Canada, which accounted for 44.6 percent of its global revenue, is stagnant, highly competitive and challenging to grow. Based on the latest financial report, it lost 919,000 paid subscribers in the US and Canadian markets in 2022, but still managed to achieve a 9 percent increase in revenue.
While Netflix did not comment on the reason for the revenue growth, Q4-22 was the first quarter to include Netflix’s new ad-supported service, which launched in November, in earnings results. Nor has it disclosed what proportion of the new subscriptions come from users who opted for this cheaper service. The number of subscribers in the home base grew by 909,000 in the fourth quarter.
Netflix relies on exponential growth in APAC to boost its global growth.
According to a 2021 report from independent transaction advisory firm RBSA Advisors, India’s OTT streaming industry, including video and audio, has the potential to grow nearly ninefold to $15 billion by 2030.
This includes $12.5 billion for the video market and $2.5 billion for audio. The size of the OTT market in 2020 was about $1.7 billion. The URBSFA said key growth drivers include India having the second highest per capita consumption of online video in the world, the cheapest mobile data in the world, strong growth in Internet penetration in the rural areas and the surge in smartphone users in India, estimated to exceed 760 million by 2021.
OTT platforms have made huge investments in originals to drive subscription demand. Together with purchased content, KBRV expects subscription video-on-demand to account for 93 percent of total OTT revenue in India (compared to 87 percent globally). cent between 2019 and 2024.
In addition, the consultancy expects user penetration to increase from 25.8 percent in 2021 to 32 percent in 2025 with OTT users at 462.7 million.
Industry insiders estimate that Netflix will have about 6 million subscribers by the end of 2022. By far the leading streaming platform in India is Disney+Hotstar with 57.5 million subscribers.
This is after it suffered its largest quarterly drop in paid subscribers of 3.8 million in the October to December 2022 quarter.
The number of subscribers fell mainly due to the loss of the rights to the Indian Premier League (IPL). That it no longer has rights to the IPL could benefit Netflix in its subscriber acquisition in India.
Local content creation is a key factor in the growth of the APAC market. Research firm MPA expects Netflix to increase its local content spending in the region by 15 percent to $1.9 billion, representing 47 percent of revenue.
Netflix produced nine Indian local originals in Q4-22 to help it gain a stronger foothold in the market. MPA’s report suggests that India will continue to be the fastest growing markets in Asia for Netflix along with Indonesia.
MPA estimates that India, Indonesia, Thailand and the Philippines will collectively contribute more than 20 percent of Netflix’s APAC revenue in 2023. The company sees these countries’ contributions continue to grow in the second half of 2023 “through a mix of subscribers and ARPU growth.”
The other market in which Netflix sees potential in 2023 is Australia.
Vivek Couto, executive director of MPA, noted that Netflix’s ad level has had a slow start in APAC, but said “Australia is expected to see greater momentum through 2023, which will help drive subscribers and revenue in a market where customer churn is increasing.”
Another country in APAC critical to Netflix’s success in the region is Japan, which contributes about a quarter of Netflix’s total APAC revenue.
Couto noted that “Japan will continue to grow as Netflix strives to increase impact with new scripted non-anime shows” being produced in the country.
MPA’s researchers also noted the power of Korean content and Japanese anime in driving growth across the region. In 2022, Netflix released 29 exclusive Korean dramas, six of which were among the top 10 reaching titles in APAC in 2022, according to estimates by MPA subsidiary AMPD Research.
On its latest earnings call, Netflix forecast global revenue to grow 4 percent in Q1-23, propelled by a combination of year-over-year growth in average paid memberships and ARM (average revenue per membership).
“2022 has been a tough year, with a bumpy start but a better end,” the company said in a statement accompanying its financial results. “We believe we have a clear path to reaccelerate our revenue growth: continue to improve all aspects of Netflix, launch paid sharing and expand our advertising offerings. As always, our north stars continue to delight our members (subscribers) and build even greater profitability across time.”