Netflix will take a step towards completing the final leg of its international expansion as the US streaming video service provider makes its first foray into Asia with its Japan launch this week.
Described by local media as the "black ships" of Commodore Matthew Perry — referring to the arrival of US mission to Japan in the mid-19th century — the arrival of the US challenger has raised hopes for a shake-up of the Japanese television industry following Netflix's successes in North America and Europe.
"There is no vision of being a global internet television network that doesn't include operating in Japan," Greg Peters, who heads Netflix's Japanese unit, said on Tuesday ahead of its Japan debut on Wednesday.
Digital services such as Netflix and Amazon have lured viewers from traditional broadcast and cable networks with affordable pricing and strong original content such as House of Cards, triggering fundamental changes in TV viewing habits.
Netflix operates in more than 50 countries with a subscriber base of 65m, of which 23m are outside of the US. It aims to expand into every significant global market — including China and India — by the end of 2016, making hefty investments that will in the short term expand its operating losses for non-US businesses.
As a stepping stone into Asia, Mr Peters says conditions in Japan are ripe for acceptance of Netflix's on-demand services. The infrastructure is already in place with households having access to broadband internet and mobile devices.
Compared with launches in other markets where the percentage of local content is between 10 and 20 per cent, Netflix will have domestic offerings of closer to 50 per cent in Japan, according to Mr Peters.
The company has already announced tie-ups with TV broadcaster Fuji Television Network and Osaka-based talent agency Yoshimoto Kogyo to produce original local content.
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Earlier this week, it also announced a partnership with SoftBank, which would allow its users to pay Netflix subscription fees through the Japanese telecom and internet group's payment system. Netflix's monthly pricing plan for Japan ranges from Y650 ($5.40) to Y1,450 while it costs $8.99 a month in the US.
Netflix said the penetration of its services in Japan would probably be gradual. Another US rival, Hulu, which entered the Japanese market before Netflix, struggled after its Japan launch in 2011 and its Japanese service was later sold to local broadcaster Nippon Television Network.
"There is still no growing awareness of paying money for content in Japan," said Goro Oba, a media expert at Bukkyo University who previously worked at a TV broadcaster.
Japan has a strong public broadcaster called NHK, the equivalent of the BBC in the UK, and six other free-to-air broadcasters. Many Japanese still visit rental DVD shops rather than obtaining content online. Less than 30 per cent of Japanese households subscribe to pay-TV compared with 85 per cent in the US and 60 per cent in the UK, according to estimates by Media Partners Asia.
Still, some media experts said Netflix's arrival would be a good catalyst for Japan's TV industry, which has suffered from declining viewing ratings. A tie-up with Netflix could also potentially allow Japan's media content to reach a global audience.
"Until now, it made sense not to change the business model since it was so profitable," said Natsuki Tohsaka, a media expert who also works at a TV broadcaster. "Once the digital age starts, the TV broadcasters will not be able to survive in the next five years unless they keep up with the pace of the changes."