Global streaming operation Netflix is forecast to spend $1.9 billion on local content in the Asia-Pacific region this year as group revenue from the region accelerates to 12%, according to a new report. The content investment spending figure represents a 15% hike.
Netflix will grow revenues this year by 12% year-on-year to exceed $4 billion compared with 9% growth in 2022, says a new report published on Monday by Media Partners Asia.
According to the Singapore-based research and analysis firm, Netflix’s revenue growth in 2023 will benefit from: a rebound in the lucrative but saturated Australia market, where Netflix’s performance will be gradually bolstered by advertising growth; robust levels of growth in Japan and South Korea, which generate high per user revenues; and material gains and contributions from India, Indonesia, Philippines and Thailand.
“The ad tier has seen a slow start in the three APAC markets. Australia is expected to see greater momentum through 2023, helping boost subscribers and revenues in a market where churn has been increasing,” said MPA executive director Vivek Couto in commentary.
“Japan will continue to grow as Netflix strives to grow impact with new scripted non-anime shows. Japan is critical to Netflix’s prospects in the region with the market contributing over a quarter to the company’s total APAC revenues in 2023,” said Couto.
Japan is Asia’s second largest economy and, as Netflix is not present in China, the streamer’s largest in the region. Physical media have only slowly given way to video streaming in the country, which boasts a large number of small local players and where, despite relatively low levels of SVOD penetration compared with developed markets in Europe and North America, industry consolidation is already under way. Amazon’s Prime Video is the streaming market leader in Japan, but Netflix has a strong presence and a growing roster of anime and other original content.
India, Indonesia, Thailand and the Philippines will contribute through a mix of subscriber and ARPU growth with impact in the SEA markets likely to felt especially in 2H as these four markets contribute more than 20% in aggregate to 2023 revenues.”
“Netflix’s local content investment will reach US$1.9 billion in 2023, representing 47% of revenues, driven by Korea, Japan and then followed by India, Australia and parts of Southeast Asia,” the report indicated.
The streamer previously pledged to spend close to half a billion dollars in 2021 in Korea. But that announcement was made for politically-strategic reasons as the company was fighting multiple issues in the country, and it has not since disclosed spending targets in any Asian market. MPA’s report suggests that South Korea is still the largest Asian destination for Netflix’s content dollars – a trend that likely reflects the high export potential of Korean content that MPA has noted in several previous reports, and content price inflation in Korea. It has also made long-term production commitments in Japan.
“Netflix’s APAC content investments have global impact,” said Dhivya T, lead analyst and head of content insights at MPA. “Leading Japanese series and anime together with Korean dramas and movies as well as movies from Indonesia and India have ranked among the globally top streamed titles over the past 12 months through Jan. 2023.”
In 2022, Netflix released 29 exclusive Korean dramas, of which 6 were among the top 10 reaching titles in APAC in 2022, according to data from MPA subsidiary AMPD Research. In early 2023, “Singles Inferno S2” and “Physical 100” have trended strongly, suggesting growing international success for Korean unscripted shows.
Other Asian content has shown regional travelability, notably India’s “Mismatched S2”, Thailand’s “The Whole Truth,” Taiwan’s “Mom, Don’t Do That!” and Indonesia’s “The Big 4.”
Netflix’s English global hit originals have also performed well in APAC, led by “Stranger Things” and “Wednesday.”
MPA’s report suggests that India and Indonesia will remain the fastest growth markets in Asia for Netflix. India’s is a result of strong low-ARPU subscriber growth, with viewership driven by nine local (Indian) originals in the fourth quarter of 2022.
MPA research indicates that illicit password sharing is at its highest in Indonesia, Korea, The Philippines, Thailand and India.
In Feb. 2023, the company also announced price adjustments in Southeast Asia. “The move could further boost subscriber acquisition and upsell in these markets, as well as likely prepare the markets for [authorized] password sharing in the second half of 2023,” the report added.