
Netflix's Winning Strategy in South Korea Is Blueprint for Its Success
International has become a big part of Netflix's (NFLX) - Get Report seemingly unstoppable growth story. In its second-quarter letter to shareholders on Monday, the streaming giant notably said it expected to see positive earnings contribution from its international segment for the first time ever in 2017.
Netflix reported 5.2 million subscriber additions in its Q2 earnings report, which included a big 4.1 million influx of international subscribers. A large part of the streaming company's international growth can probably be attributed to its increased focus on international programming. In particular, Netflix's final Q2 release "Okja" was a big buzz-generator for the company, attracting interest when the streaming company's other film releases have failed to do so.
Chief Content Officer Ted Sarandos said on Monday's earnings webcast that "Okja," which is directed by acclaimed South Korean director Bong Joon-ho, was a major factor in the company's growth in South Korea.
"It helped attract new subscribers but it also brings a brand halo to Netflix that it's great content worth paying for," Sarandos said.
Netflix notoriously does not release ratings for any of its programs, but several details back up Sarandos' claim. For one, "Okja" premiered to largely glowing reviews at this year's Cannes Film Festival, which gave the film a large platform to attract buzz. The film was also the subject of some controversy during the festival due to anti-streaming sentiment, prompted by a French exhibition rule which requires a three-year delay between a film's theatrical release and its appearance on a streaming service.
Netflix has notoriously insisted upon streaming its films at the same time as theatrical releases (known as day-and-date release). "Since our members are funding the films, they should be the first to see them," the company explained in its Q1 newsletter.
Exhibitor resistance to streaming also was a story in South Korea, where "Okja" was boycotted by the three major cinema chains. However, the film still enjoyed sold-out theaters in the handful of venues that did show it, even for early-morning screenings. The film was an unlikely hit and boosted awareness for the streaming giant.
"For most people, they learned about Netflix for the first time when 'Okja' was coming out in Korea," Sarandos said on the earnings call. Netflix first started streaming in South Korea in January 2016.
The company's growth in the territory had already been forecasted to be meteoric even without the help of "Okja." According to online statistics database Statista, Netflix had 877,000 subscribers in South Korea in 2016, with the number projected to grow to 3.85 million by 2020. Netflix's increased focus on matching the programming to local tastes could even accelerate that rate of growth.
"As Netflix has become more global, the company is increasingly devoting capital to non-English language originals to appeal to a wider range of audiences," said Raymond James analyst Justin Patterson. "Over the next few years, we expect more local content investment in Asia to drive successful results in the region."
Indeed, Netflix already features a "Korean TV" subgenre in its TV show browsing interface. Last month it released South Korean drama series, "My Only Love Song," which joins other South Korean "Netflix Originals" such as sitcom "The Sound of Your Heart" and fantasy series "One More Time."
In other territories, Netflix's diverse content strategy have taken off, with the streaming company seeing continually strong growth in Latin America thanks to a large portfolio of Spanish-language content.
"Our Spanish language original 'Ingobernable,' starring Kate del Castillo, has been viewed by millions of members outside of Mexico," the company said in yesterday's letter to shareholders. "Similarly, in Q2, our first original from Spain, 'Las Chicas del Cable' attracted significant viewership in the U.S. and throughout the entire Spanish-speaking world."
Netflix shares were up almost 14% Tuesday afternoon at $183.81, close to an all-time high.










