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The international market is proving to be a gold mine for Netflix (NASDAQ: NFLX). The streaming giant's international subscriber numbers have grown by leaps and bounds in recent quarters, enabling it to offset the slowdown in the U.S. market. But despite the impressive increase in the company's international subscriber count, it still has a lot of room to grow its business in markets such as the Asia-Pacific region.
That's probably why Netflix CEO Reed Hastings is now contemplating stepping back from the company's premium pricing policy to capture more users in a market that could be fertile territory in the long run.
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Netflix could make this unprecedented move...
As Bloomberg reports, Netflix has been known to maintain or raise pricing in the key markets where it operates. But Hastings recently said that the company is looking to experiment with lower pricing plans. He didn't provide any specifics as to when and where the company will test this strategy, but this is the second time in a month that Netflix has admitted it might be looking at a lower-priced subscription tier in certain markets.
Gregory Peters, the chief product officer at Netflix, said that the company is looking to "experiment with other pricing models -- not only for India, but around the world -- that allow us to sort of broaden access, by providing a pricing tier that sits below our current lowest tier."
Netflix isn't expected to disturb its current three-tier pricing model. Instead, it's expected to add a fourth pricing tier that will cut down on more features but help it attract new users into the ecosystem. If implemented, this would be a smart strategy on Netflix's part; the company would be better-equipped to cut its teeth in a market such as the Asia-Pacific region, which seems to be the most plausible place to test its lower-priced plan. Let's see why.
...to tap the multibillion-dollar Asia-Pacific opportunity
London-based agency Digital TV Research estimates that Asia-Pacific will have 351 million subscription video-on-demand (SVOD) customers by 2023. For comparison, there were 141 million SVOD customers in this region last year, with revenue standing at $5 billion. That revenue base is expected to triple in the next five years as the subscriber base grows by leaps and bounds.
Netflix, however, would find it difficult to tap into this opportunity given its current pricing structure. For instance, Netflix's base pricing plan of nearly $7 per month in India is much higher than the $2.75-per-month subscription charged by Hotstar (owned by Twenty-First Century Fox). Similarly, Asian streaming service Viu (owned by PCCW Limited) offers a monthly subscription that costs between $2 and $5 per month.