Why is Netflix scaring so many?

Giant pay-TV companies such as DStv don’t intend to sit back and watch as Netflix swallows up their share of the pie. PHOTO| FILE

What you need to know:

  • Netflix offers access to movies, documentaries and TV series at between Sh815 and Sh1,222 a month, which is significantly lower than the rates for  pay-TV firms DStv and Zuku.

  • Some of its popular shows and movies are Narcos, Blacklist, Marco Polo, Making a Murderer, Beasts of No Nation, House of Cards and Orange is the New Black.

When US-based streaming service Netflix was launched nearly 20 years ago, it had little appeal, and not many people gave it much thought. Even Blockbuster, then the leader in home movie and video game rental services through video rental shops, DVD-by-

mail, streaming, video on demand, and cinema theatres,  didn’t pay any attention to the new kid on the block.

At its peak, Blockbuster had more than 9,000 stores and some 60,000 employees. Netflix stood no chance, or so it appeared.

But 13 years later, it was a case of David and Goliath when Blockbuster, thanks to competition from new entrants like Netflix, saw its revenue gradually dip and  finally filed for bankruptcy protection.

April 2011 saw the company breathe its last when, together with its remaining 1,700 stores, it was bought by satellite television provider Dish Network for $233 million at an auction.

So you can quite understand why many dominant players in the region are shaking in their boots when the company announced it was launching in Africa as part of its global expansion.

Its entry has elicited a lot of excitement among TV and movie buffs, who laud its vast library and low monthly costs which, even paired with most data connection charges, is still less than half what many pay-TV services charge.

So, what is Netflix and why has it sent so many companies running scared?

Netflix is the world’s leading Internet television network, with more than 75 million members in more than 190 countries. It boasts more than 125 million hours of TV shows and movies per day, including original series, documentaries and feature films.

“Members can watch as much as they want, anytime, anywhere, on nearly any Internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments,” reads a statement on its website.

To get Netflix, one must subscribe, and its membership is on a monthly basis. To view it, one requires good Internet connection, and it can be watched from any Internet-connected gadget.

Netflix offers access to movies, documentaries and TV series at between Sh815 and Sh1,222 a month, which is significantly lower than the rates for  pay-TV firms DStv and Zuku.

Some of its popular shows and movies are Narcos, Blacklist, Marco Polo, Making a Murderer, Beasts of No Nation, House of Cards and Orange is the New Black.

BETTER OPTION?

This week, DStv used  a comparison chart in an attempt to explain to its subscribers and the general public why it is the better option compared to Netflix. It claimed to have “More content and no Internet connection required”. It also tried to appeal to people to be loyal to what is home-grown by reminding them that, unlike Netflix, it is an “African company”.

Although they might not show it, the pay-TVs are undoubtedly going to feel the heat from Netflix in what is called “disruptive innovation.”

Clayton Christensen, the man known as “The father of disruption theory”, and who popularised the term “disruptive innovation” in his book, The Innovator’s Dilemma, says Netflix is the best example of the phenomenon.

He writes in the Harvard Business Review: “However, as new technologies allowed Netflix to shift to streaming video over the Internet, the company did eventually become appealing to Blockbuster’s core customers, offering a wider selection of content with

an all-you-can-watch, on-demand, low-price, high-quality, highly convenient approach. And it got there via a classically disruptive path… But failing to respond effectively to the trajectory that Netflix was on led Blockbuster to collapse.”

However, Netflix is not banking on the excitement of its customer base or its disruptive nature. In 2016, the company intends to spend more than $6 billion (Sh600 billion) on video programming, about $1 billion (Sh100 billion) in marketing, and more than $800 million (Sh80 billion) in technology and development.

But don’t expect Pay-TV stations to just take the threat to their business lying down. According to The Wall Street Journal, Netflix’s foreign rivals are teaming up. Pay television and streaming players from France to New Zealand, Norway to Australia, and

Canada to the Philippines, are forming bidding alliances to buy local rights to TV shows.

In Africa, giant pay-TV company DStv launched Showmax, an online-based platform to take Netflix on. According to DStv’s CEO, Tim Jacobs, they are focusing on how to beat Netflix to a potential audience of more than one billion across Africa.

“Our parent company, Naspers, recently launched Showmax in South Africa and the intent there is they (Netflix) also get to compete with us,” he says. “How do we compete? The one benefit that pay-TV has is the freshness of our content. The big

differentiator, the one thing you will never see on Netflix is all of the local content we produce and live sports events, which is big for many subscribers,” said Jacobs in an interview last year.

But it’s not just the TV content providers whose feathers Netflix has ruffled. The Kenya Film Classification Board (KFCB) insists that the company must comply with Kenyan rating standards.

KFCB Board Chairman Bishop Jackson Kosgei said Netflix’s film streaming services remain a threat not only to local moral values, but also to national security, adding that its intention was not to scare investors from setting up shop in the country but simply

asking them to conform to the local moral code.

“Some of the movies sampled that were rated as suitable for 13-year-olds contain classifiable elements such as extreme violence, nudity, promotion of irresponsible sexual behaviour, inappropriate language and drug abuse, and Netflix knows this. If they do

not come for the meeting we notified them of last week, we will go to California and meet them since America is not heaven where you have to die first — we will simply get air tickets,” said Mr Kosgei.

But this move has not gone down well with ICT Cabinet Secretary, Joe Mucheru, who practically told the board off, asking them to hold their horses pending direction from the government.

“The government is responsible for regulation. Policy will come from the government, then it will be regulated. But this will take some time, so the regulators have to wait.”

The Communication Authority of Kenya has also said that Netflix is exempt from local broadcasting regulations. “Netflix is an OTT (Over-The-Top) provider, where subscribers get the content through Internet protocol, more or less like YouTube, and as

such, we are not going to ask them to come for a licence,” the regulator said.