Netflix launched in its 81st country Wednesday, and it’s a big one. Via a partnership with Softbank announced last week, the media streaming service debuted in Japan. The expansion introduces Netflix to an untapped potential audience of nearly 36 million broadband customers.
Netflix’s Japan push is part of an effort to strangle the company’s would-be biggest competitor in its crib.
The Japan move is “absolutely necessary to protect the future of Netflix’s scale, but also against whatever is coming from Apple,” Brian Solis, principal analyst at Altimeter Group told TheWrap. “It’s actually a bigger deal than it’s getting credit for, because it’s going to be a very lucrative market, and it’s only going to push Apple in terms of having to go toward the same types of deals around the world.”
Apple has been developing a streaming service, one that would include a slimmed-down version of the traditional cable-television bundle. The company was also reported this week to have been in very early talks with film and TV production companies about creating its own original content.
In the U.S., Netflix’s principal competition at the moment comes from Hulu and Amazon, as well as legacy cable brands HBO and Showtime that have launched their own streaming services in recent months.
Those brands have international ambitions of their own, but so far have met with mixed results. Hulu sold its Japan service, launched in 2011, to Nippon TV last year. Japan was the first market that Hulu moved into outside the U.S., and it turned out to be a bust.
Netflix is hoping it can avoid a similar outcome by investing more heavily in content. Earlier this year, an analyst at Janney Montgomery Scott estimated that Netflix could spend as much as $5 billion on content in 2016.
Asked on a July earning call what Netflix would do differently than Hulu in Japan, CEO Reed Hastings said, “We will have local content. We may have some local originals.”
He added that Japan “may be one of our best markets in the long-term because when the Japanese society embraces a brand, it is a very deep connection, very long term. So we’re willing to make that investment knowing that it’s not the quick route to success that might be in other countries.”
The Softbank deal, whose financial details remain undisclosed, includes an agreement to partner on future original content.
Netflix has already ordered multiple original series from abroad, such as the French-language and French-produced “Marseille” and the U.K.-made “The Crown,” both upcoming.
Mexican-produced Spanish-language soccer drama “Club de Cuervos” premiered in July, rolling out simultaneously across all Netflix’s markets. Making as much of its content global as possible is an emphasis for the company, both for originals and licensed content.
But global licensing rights can be expensive. Last year, Netflix acquired global rights to Sony-produced “The Blacklist” for a cost between $1.5 million and $2 million per episode, one of the most high-cost off-network sales of a series ever. At prices like that, originals may be a more cost-effective way for Netflix having consistency in its libraries across multiple territories.
They are also a way for the company to differentiate itself from the looming threat that Apple presents. Solis calls it “inevitable” for Apple to move into the streaming space.
“The content business isn’t just a domestic product,” Solis said. “It’s a global experience. For a company like Netflix to scale globally, it’s protecting itself from any types of local or emerging global competitors.”