TOKYO/PALO ALTO, U.S. — Netflix will ramp up its original content offerings in Japan and other parts of Asia to boost its subscriber base, co-founder and co-CEO Reed Hastings said, in what would likely add significant pressure to the region’s local streaming services and broadcasters.
Netflix has been able to disrupt Hollywood by investing heavily in original shows since 2011, but its presence has been relatively small in Asia, where most of its operations go back to 2016. It is quickly gaining ground, though, as users flock to the service thanks to a string of original local shows and exclusively licensed content.
The company’s expansion into Asia is “just beginning,” Hastings told Nikkei Asia in an interview on the sidelines of the Nikkei Global Management Forum.
While it is blocked in China, Netflix’s user growth accelerated in other parts of the region this year. Asia accounted for nearly half of the 2.2 million paying members Netflix gained in the third quarter. It had 23.5 million subscribers in Asia as of September, including 5 million in Japan, a market it entered in 2015.
“It’s a great start, but it’s just a start,” Hastings said. He added that he expects Netflix, like its competitors YouTube and Disney, to remain blocked in China for “quite a long time.”
“So we’re focused completely on Japan, [South] Korea, India, the big markets,” Hastings said.
Its popularity has been fueled by local content. “The Naked Director,” an original Japanese drama series about an adult filmmaker, was the most-watched title in Japan last year, according to Netflix. A second season is slated for release next year, despite production delays due to the pandemic. Last month, the company also announced new partnerships with anime studios in Japan and South Korea.
“We’re already one of the largest exporters of Japanese anime,” Hastings said.
Netflix’s expansion in Asia will likely fuel competition in an increasingly crowded market, as entertainment companies, broadcasters and tech groups scramble to tap the rapidly growing number of internet users in the region.
Disney’s streaming service launched in India and Japan this year. Local television broadcasters have teamed up to launch streaming services that offer their programs online. Chinese internet giant Tencent Holdings in June said it bought assets of Iflix, a Malaysian streaming service.
Japan’s Sony, meanwhile, is in discussions to buy U.S. anime streaming service Crunchyroll from AT&T, Nikkei reported last month.
“If they do that, then we’re competing,” Hastings said of Sony’s reported move, noting that Netflix buys “a lot of content” from the Japanese company. “But we’re used to that because there’s so much competition. It’s just up to us to have something unique.”
Netflix has also stirred controversy with some of its ambitious programs. The release of “Bad Boy Billionaires: India,” an original documentary series about scandals surrounding Indian tycoons, was temporarily postponed due to court challenges in the country. Indonesia’s largest state-owned telecommunications company only recently lifted its ban on Netflix, which had been in place since 2016 due to concerns over violent and sexual content.
“When you’re on state television or broadcast television, and the channels available in every home, I understand why some governments are very conservative,” Hastings said. “But we are so tame compared to some of the crazy stuff on the internet. If the people have access to the internet, then Netflix is quite gentle, professional, clean.” He added that Netflix offers a variety of safety features such as parental controls.
Netflix’s market capitalization stands at more than $200 billion, dwarfing U.S. cable networks and close to that of Disney.
Hastings brushed off speculation that the company’s growth momentum — an “incremental bonus” — will slow after the coronavirus pandemic.
“I think restaurants, bars, sports stadiums and movie theaters would all be very strong,” he said, “because everyone is going to want to get out and remember what life was like. People like a communal experience, and going to the movie theater some of the time, and they like watching at home. It’s just like everyone can cook food but they also like going to a restaurant. It’s fine to do both.”
Nikkei staff writer Masashi Ijichi contributed to this report