Why the timing of Netflix’s SA launch matters

2016-01-08 12:55 - Gareth van Zyl
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Johannesburg - Netflix switched on its service in 130 countries this week but the launch in South Africa comes when there is greater demand for video on demand services locally.

This is the view of Arthur Goldstuck, who is the managing director of technology research company World Wide Worx.

He says there are three reasons why Netflix had to accelerate its launch in South Africa.

1. Demand for internet video

Over the last 18 months, video on demand services such as Times Media Group’s VIDI, MTN’s VU, Naspers’ ShowMax and Hong Kong based PCCW’s ONTAPtv.com have launched in South Africa. 

Orange Horizons has also said it plans launching an on-demand video service in South Africa this year.

“Although South Africa is one of many new territories added by Netflix, there was also a greater sense of urgency to launch here than had been the case when the company first announced it would enter this market. There are three key reasons it had to accelerate its launch plans in SA,” Goldstuck told Fin24.

“Firstly, the market has exploded with competitors and options, meaning that many of the most likely users would already be grabbed by the end of 2016..

“ShowMax has made tremendous strides in bolstering its offering, ONTAPtv is moving in aggressively, MTN has relaunched its FrontRow service as VU and Times Media's VIDI remains an option,” said Goldstuck.

2. More fibre broadband

In addition, more fibre services have been rolled out in upmarket suburbs such as Johannesburg’s Parkhurst, Bryanston and Hyde Park in recent months. 

Telkom has set a target of connecting one million homes to fibre by 2018 while independent provider Vumatel has targeted 100 000 homes by 2016.

“Fibre to the home is accelerating much more rapidly than anticipated, making this a more viable market more quickly than had been expected,” said Goldstuck.

3. Expanding the offering

“Thirdly, the longer Netflix waits, the more time the competitors have to flesh out their offering to make it comparable to or better than that of Netflix,” Goldstuck told Fin24. 

“Similar dynamics may well be at work in some of the other new territories,” Goldstuck said.

Netflix told Fin24 on Thursday that it planned to expand its content catalog for South Africa which is currently limited by content rights. The company plans to spend $5bn on global content rights in 2016 to expand its range of content in different parts of the world.

“The world of content licensing has traditionally been very fragmented and regionalised,” Netflix told Fin24.

“It will take some time, several years at least, to get to an offering that’s the same everywhere,” the company said.

*Fin24 is part of Media24 which is owned by Naspers.

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