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Netflix CEO: Local content is the way forward

Locally produced, globally distributed content is the future of Netflix, the company's co-founder and CEO told CNBC on Wednesday.

Speaking on the sidelines of the Asia Pacific Pay-TV Operators (APOS) summit in Bali, Reed Hastings said the streaming service would invest heavily in international programming that would be released to all markets simultaneously, such as upcoming French television series "Marseilles" and South Korean film "Okja."

"We're just adding so much content around the world...we hope to be producing content all around the world. That's the future for Netflix: local production, global distribution."

The move appears aimed at boosting international subscriptions, often cited by analysts as a potential weak spot. Despite a growing user base, Netflix currently earns less per international subscriber than per American customer.

Last week, the firm reported first-quarter results that were double analyst expectations and announced a net gain of 6.74 million memberships—2.23 million in the U.S. and 4.51 million internationally—that also beat Wall Street estimates. But Netflix's guidance of adding 500,000 net U.S. subscribers and 2 million internationally in the second quarter was lower than market expectations.

Producing more foreign-focused television and film could also appease users' complaints of limited content in overseas markets. For example, the company's most popular series, "House of Cards," isn't available in Singapore, which sparked a user backlash when the service launched in the island-state back in January.

Regulatory hurdles

Singapore was one of 130 countries Netflix entered earlier this year as part of an aggressive worldwide expansion program. But the country's entry into Indonesia, Southeast Asia's largest economy, was complicated after the service was blocked by the country's biggest internet service provider (ISP), Telekom Indonesia, which cited permit and tax issues.

"We hope the issue dissipates over time. Customers want the freedom to choose if they want to join...," Hastings said, adding that other Indonesian ISPs did not block Netflix. "Everywhere else in Asia, there's no blocking, just the single ISP in Indonesia," he said.

Netflix staff in the war room ready for the launch of the second season of original series Daredevil on March 17, 2016 at Netflix headquarters in Los Gatos, California.
GLENN CHAPMAN | AFP | Getty Images
Netflix staff in the war room ready for the launch of the second season of original series Daredevil on March 17, 2016 at Netflix headquarters in Los Gatos, California.

Hastings said Netflix was exploring ways to start operating in China, a market already well-serviced by homegrown streaming businesses such as LeEco.

"If you look at Apple, it took them six years to get their deal with China Mobile. They were very patient. So I don't think it's too late for Netflix. Hopefully, it won't be six years for us but we're just working with partners to understand the market so we get the right entry eventually," Hastings said.

"Most of our content, such as House of Cards, is already very popular in China, so it's more a question of building the right relationships."

Last year, Chinese President Xi Jinping referenced the drama in a speech to U.S. business executives in Seattle, in a sign of the series' ubiquity.

"We want to be as popular everywhere else as we are in the U.S. It took us seven years to get to one-third of U.S. households subscribing to Netflix so it's a very ambitious goal," Hastings said.

Streaming wars

Despite heavy-hitters such as Apple, Amazon, Disney and Fox entering the streaming business, Netflix's 55-year-old co-founder said he was not concerned about competition.

"It's an open market," Hastings said, justifying the rivalry by pointing to the fact that traditional linear, i.e. scheduled, television was no longer as useful or convenient as on-demand internet video.

But unlike competitors such as Vice, the online publisher that is also expanding into streaming, Hastings was adamant that Netflix would stick to film and television shows rather than enter the news or sports realms.

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