Netflix announced on Wednesday that it has now expanded into 130 countries around the world including Africa. The ground breaking news was well received among consumers and investors with social media going agog. Netflix share price is already up 9% today. The news did posse some potential concerns for digital satellite stations in Nigeria and internet streaming companies in Nigeria which Nairametrics highlighted in this article. But in a swift response to social media doomsayers the CEO of iRoko TV hit back in a blog post claiming that the entry of Netflix into Nigeria’s market has zero effect on his business. According to him the dynamics of an African internet market particularly Nigeria, makes it unlikely for Netflix to posse any major challenge at least from a commercial perspective. He explains that the subscription market across Africa is till in its infancy and may not have the purchasing power to sustain the likes of Netflix in Africa. He also notes the challenges with streaming online content as a major impediment to the rapid expansion of Netflix into the Nigerian market if there will ever be one. This is an excerpt of his post;
The strange thing about the mourners of iROKO is they always mention how most of our subscribers are in the West. Yup US and UK represent ~55% of our subscription base. And it’s grown (not break-neck) but steadily over the last few years, in Netflix’s back yard. Folk in the US and UK ( the top 2 Netflix markets) have been happy to pay YoY for the little service we provide.Building subscription business’ are hard. Heck we are only 4 years old. So why people think we will suddenly die now they are in Nigeria is totally beyond me. I remember when Deezer came to Nigeria (and Africa). I have been a subscriber there for almost 3 years. I use it, without fail, daily. But when they released their IPO documents, Africa wasn’t even mentioned. It represented nothing. And thats 3mb mp3 files. Not 300mb movie files which require a continuous connection for streaming.
On challenges with internet streaming
In 2015, across our YouTube channels, we saw 313m streaming video views. 185m of that was largely long form 2nd tier Nollywood content. What % was Nigeria? ~6%. And it’s free. YouTube = Free To Air Internet. Nigeria has consistently seen around 50% less engagement in Africa than comparable markets in Western Europe. Today streaming is just difficult. I have no doubt it will get better. But it’s not today. The ISPs have improved immensely, but of the tens of millions of internet users, 99% are mobile. Remember Nigeria is the most mobilised country in the world and the average person buys 105mb. The ISPs cater to the 0.5%. Around 7 months ago, we actually started adjusting our product, pricing and content around these cold hard realities.
Jason’s remarks might appear bullish, however the reality on ground suggest he is in for a very tough battle. His company as confirmed in his blog, is struggling to survive amidst a predictably tough economic situation in Nigeria in 2016. Netflix in Nigeria, no matter how irrelevant does posse a risk to his survival. His catalogue of Nollywood movies sure makes him a tough competitor. Iroko is also looking at producing its own movies and has also gone global providing the company with some buffer for its market share.
Netflix is however, a different animal and has in the past demonstrated a knack for negotiating better deals with content providers and users. They have also turned content providers churning out some of the top rated Series and TV shows in the US. Nothing stops them from replicating the same model in Africa’s most populous country and perhaps its largest market. By launching globally, they also compete within the same market that the likes of iRoko compete in. Netflix is also ubiquitous and can be seen on many more devices. Jason also confirmed iRoko also just launched its Android App. But as one analysts put it, “why pay N500 subscription to watch Nollywood only when you can pay $10 to watch thousands of content including Nollywood?”