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Netflix Is Testing Mobile-Only Subscription Service |
NEWS |
Netflix, which has achieved a dominant position in the Over-the-Top (OTT) service market, is now planning to expand by targeting mobile-first users. In November 2018, Netflix announced the rollout of a mobile-only subscription in Malaysia for only RM17 (US$4) per month. The cost of the new subscription service is less than half the price of Netflix’s existing packages in Malaysia. Users will have unlimited access to movies and TV shows available on Netflix; however, this will be only accessible on handheld devices, such as mobile phones or tablets. The service will also only support Standard Definition (SD) content. High Definition (HD) and ultra-HD content will not be currently available. Netflix also revealed that it will be testing new subscription tiers in mobile-only subscriptions in multiple markets.
Netflix’s Position in the OTT Market |
IMPACT |
Video streaming services have been competing with traditional pay TV services globally for years. Notably, there are 400 million subscribers using video streaming services globally in 2018. Features that include flexibility, low cost, and multi-device access have driven millions of users to streaming services. In mature markets, these services even cause a threat to traditional pay TV services, attracting users to cancel cable/satellite subscriptions in favor of pure streaming services. ABI Research forecasts the video streaming subscriber base will reach nearly 540 million in 2023.
As of September 2018, Netflix had more than 130 million paid subscribers globally with nearly 60% of its subscriber base from markets outside the United States. The service is accessible from most device types (phones, tablets, streaming boxes, smart TVs, etc.), with subscription packages ranging from US$8 to US$14, depending on the resolution tier and the number of screens accessing the service. Netflix’s international subscriber count is believed to be mainly based in English speaking markets with limited adoption in markets like India, Southeast Asia, and other non-English speaking markets, where factors such as local content, pricing, and accessibility can be most challenging. This recently launched service is Netflix’s first mobile-only service and it is a smart initiative to improve accessibility in order to gain market shares in such markets.
Reaching Mobile Users Is Essential in Emerging Markets |
RECOMMENDATIONS |
Both pay TV and video streaming services need to recognize the changing video consumption behaviors of consumers. Today’s consumers demand to watch video content on various devices, in addition to TVs. Accessibility to mobile devices is increasingly important. This is driven by high smartphone penetration and increasing mobile network coverage. Increasing availability of live video streaming services is another factor driving mobile-first video services. Live streaming of sports and events can be a catalyst for growth, where parity with existing services is important. In addition, younger users have a higher tendency to watch video content on mobile devices, with a strong appetite for mobility, interactivity, and flexibility driving demand.
In markets with limited broadband infrastructure, mobile networks are usually a primary broadband access method. This creates an opportunity for mobile-first video services. In Malaysia, where Netflix launched its first mobile-only service, fewer than one-third of households have access to fixed broadband service, while the majority of the population relies on mobile broadband. In fact, Malaysian-based service provider iflix has been targeting mobile users for its streaming service. iflix is also implementing mobile-first streaming services in other markets in Asia, as well as in the Middle East & Africa, that suffer from a similar lack of fixed broadband infrastructure.
While mobile-centric streaming services create opportunity for service providers, limited mobile broadband speed and mobile data cost can create challenges in providing services. Efficient encoding and video distribution solutions are essential for effective video delivery. Strong partnerships with mobile carriers are important to make the data cost affordable for the average user. Also, like any other subscription video service, content is key to maintaining a subscriber base. Service providers need to make sure there is a wide range of local content and more globally popular content to ensure long-term success. This is especially true in providing services in markets like India, Southeast Asia, or other non-English speaking countries. When 5G services are commercially launched, there will be greater opportunity for mobile-first video services as well. The right choice of technology and monetization strategy will enable service providers to achieve maximum success with these new mobile-targeted video services.