Fact-Checking Reed Hastings: Netflix's Big Challenge Overseas

Reed Hastings World Comp - H 2016
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Reed Hastings World Comp - H 2016

The CEO boasted at CES that the streamer is now live in 130 new countries, but licensing, languages and infrastructure pose problems.

This story first appeared in the Jan. 22 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

How Realistic is Netflix CEO Reed Hastings' plan for world domination?

Hastings shocked the CES audience in Las Vegas by revealing his streaming service went live Jan. 8 in 130 new countries, tripling the number of nations in which Netflix operates. There were minor exceptions — Syria, North Korea and Crimea, and a major one, China. He called Netflix the first global TV network, available "from Singapore to St. Petersburg, from San Francisco to Sao Paulo." But that image of a universal monolith underestimates challenges ahead.

Netflix until now has picked mostly soft targets for international expansion — such countries as Canada, the U.K., France and Japan with educated populations, fast Internet connections and democratic governments. This new push includes a few territories that meet those requirements, such as South Korea's 18 million broadband homes. But there also are 54 African countries, many with spotty tech infrastructure and lethargic download speeds, and the mostly autocratic and censorious regimes of the Middle East and Southeast Asia.

India might be the world's second most populous country, but only about 5 to 7 percent of its citizens watch TV in English, according to a study from accounting firm KPMG. And English happens to be the only language available to Netflix subscribers there. Hastings said Netflix gradually will increase its language offerings by adding Chinese, Korean and Arabic to the mix of 17 languages it supports.

Global Netflix services typically offer a fraction of what American subscribers enjoy because — despite the efforts of chief content officer Ted Sarandos — it's difficult to license content worldwide. Many top shows are locked in multiyear deals with local competitors. Figures compiled by Finder.com show Netflix's German service offers 28 percent of TV titles available in the U.S. Netflix in Israeli has 438 film titles, a 10th of the U.S. offering. At the same time, Netflix has adjusted pricing, but not by much. An Indian subscription starts around $7.50 versus $7.99 in America. The price in Europe is slightly higher at about $8.70, and in Singapore it's $7.66.

Hastings has said "nearly every new dollar" Netflix spends is for "global content and global rights" and that regional differences between Netflix offerings "will narrow out of existence over time." The streaming giant is sinking more than $5 billion this year into creating international series and films such as British period piece The Crown, Mexican dramedy Club de Cuervos and Korean monster movie Okja from Snowpiercer director Bong Joon-ho. "The bull case … is that Netflix finds its Narcos or House of Cards for those territories," says Morgan Stanley analyst Benjamin Swinburne. Even without China, which experts forecast could supply 10 million new subscribers, Swinburne expects Netflix's international subs to hit 75 million in 2020 versus the current 29.5 million.