A few weeks ago I put up a post asking if any streaming service could catch Netflix. Most respondents said no and agreed with me that Netflix had a commanding lead in the streaming space. A few said that Disney’s new service and Amazon Prime Video would chip away at the lead that Netflix has and a few mentioned Apple getting in to the game as well. One topic that I alluded to in the earlier piece was not mentioned by anyone—Netflix is a powerhouse outside of the U.S. Depending on the estimates that you look at, Netflix has somewhere between 140 and 160 million subscribers. Last year, for the first time, Netflix had more non-US subscribers than domestic ones and their growth is largely overseas as move through 2019. Netflix now is available in 190 countries. They are licensing or producing hundreds of programs in many languages and their knowledge of what viewers like in different cultures is getting stronger by the day thanks to their shrewd use of Big Data.
When people tell me that Amazon will soon catch up, I can only smile. Amazon is a superb on line retailer and will be tough competition at some point for sure. Yet, keep this in mind. Netflix does basically one thing—providing programming. Amazon operates globally as well and many perceive Amazon Prime Video as a free service as it is embedded in an Amazon Prime subscription. The rub is that Netflix can deliver their service to virtually anyone, anywhere who has high speed internet. Amazon Prime operates globally but does not deliver to every podunk village in the world. The costs of delivery would be prohibitive at present and many overseas customers cannot afford a prime subscription. They would have to spin off Amazon Prime Video or make it available freestanding to go head to head with Netflix. It would take years to be a viable GLOBAL competitor to Netflix. Disney needs to crawl and then walk with Disney + before traveling abroad with the service. So, the head start that Netflix has appears to give them an advantage that could protect them for several years which is a lifetime in today’s tech world.
So, is Netflix completely safe? I see one little known (in the U.S) but viable player out there who could possibly upset Netflix’ global juggernaut. We have all heard of the BAT’s in China. Baidu is the Google of China, Alibaba is the Amazon of China, and TenCent is the gaming giant of China. A fourth player is iQIYI (pronounced eye-chee-yee) which is rapidly being nicknamed by securities analysts as the Netflix of China. iQIYI is a bit different than Netflix in that it has free content with advertising plus a subscription service that others use. The subscription video service now has 80 million subscribers and is growing. iQIYI has the same cost issue that Netflix has in that it is expensive to produce original programming. Also, Alibaba and TenCent have a minor entry in streaming video at present which could grow.
A few rumors exist that say that iQIYI may move beyond China’s borders. This could put a crimp in Netflix growth especially in many Asian countries. FYI, iQIYI now trades on the New York Stock Exchange under the symbol IQ (not a recommendation but you may want to read their annual report as I did).
This is what I love about the free market. When some company appears set, they find that their competitive advantage is not sustaining for long. So, even mighty Netflix has to stay innovative and run a bit scared. To date, they have done a fine job of it.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
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