Netflix is revolutionizing the way that people around the world view television. As part of the entertainment industry, Netflix provides users with unlimited access to a variety of shows and movies, including their own original content. Since its origins in the U.S. in 1997, the market has become highly saturated and cannot sustain continued growth. Therefore, international expansion overall has been a key element for the company’s growth.
Netflix entered the South African market in 2016. They strategically chose to expand to South Africa to serve as an access point to the entire African continent, and gaining market share in this area will mean future success as development in this region continues. Currently, revenue in South Africa for the video streaming industry in amounts to US$17m. This revenue is expected to show an annual growth rate of 12.6%, resulting in a market volume of US$30m in 2022.
Expanding in South Africa has presented a unique set of challenges to Netflix as one of its first ventures into a developing country. As of August 2017, less than 10% of households in South Africa had access to the Internet. Consumers in South Africa have found that slow streaming due to slow internet interrupts the efficiency of using Netflix and makes it difficult to get full customer value. In order to succeed in this market, Netflix must do a thorough job in segmenting and targeting the market so as internet usage/speed grows in the South African market, company market share grows with it.
The typical consumer in South Africa is similar to its international customer. Their target consumer is a middle or upper-class individual that has a sufficient amount of disposable income to spend on leisure activities and entertainment. The current price of Netflix in other countries ranges from $7.99 USD to €8.99 EUR. This translates to R99 and R121 respectively. With such a large wealth disparity, Netflix must consider whether it is worth their time to try to attract customers in the lower-income market. Their one-month free trial will be sure to attract many new customers in the beginning. However, to keep these customers after their one month trial, they must spark a high level of interest in their series and set a low price that lower-income individuals will be willing to pay.
Showmax is the primary competitor to Netflix in the South African market. Even though both provide streaming services, Showmax also has downloadable content, a greater content selection, since Netflix originals are not available in South Africa and are catered more to the local population in South Africa.
South African consumers favor witty, smart, and family-oriented advertising, which can be utilized via television, radio, print advertising and social media. Additionally, Netflix can offer limited membership plans to target lower income families and offer a limited range content. The customer will pay a cheaper price and be limited to the language-specific content such as Afrikaans, Zulu or Hindi content.
If Netflix is able to successfully penetrate the South African market, there is no limit to the possibilities that Netflix has to expand to other developing countries.