In 1997, Netflix was formed as a DVD rental by mail business. Did you know that? In 2007, it evolved into this – an online subscription-based video streaming platform. Today, Netflix is available in 190 countries with about 200 million subscribers globally. Oh, and 2020’s pandemic has been good to Netflix. Its paid membership numbers grew from 182.856 million at the end of March 2020 to 193 million at the end of June 2020. Yet, the future is even brighter. RBC Capital Markets predicted an increase in subscribers from June’s 193 million to 500 million by 2030.
Well done, Netflix. Hello, Nollywood.
The Nigerian film industry is the most popular on the African continent. Nollywood produces 2,000 films a year! Only India produces more. Did you know? Already, Nollywood is Nigeria’s second largest employer. For sponsorship and partnership, Nigeria offers interesting prospects. Urbanization, an expanding middle class and a young population will continue to contribute to rapid growth.
Yet, Nollywood faces a myriad of challenges. Piracy is king among them. The World Bank estimates that for every legitimate CD sold, nine others are pirated. The industry is also plagued by low funding and poor distribution networks. According to the British Broadcasting Corporation, producing the average Nigerian movie costs between $25,000 and $70,000. Re-enter, Netflix.
Netflix’s expedition in Nollywood began in 2015 when it purchased the online distribution rights to Kunle Afolayan’s October 1. The year after, it made its platform available for subscription in Nigeria. In 2018, Genevieve Nnaji’s Lionheart became the first Netflix original movie from Africa. Across the continent, Netflix has continued this bold journey. Queen Sono, Africa’s first Netflix original drama series created by an entirely South African cast and crew, had a good first season and has been renewed for a second. In May, Netflix launched its second Africa series, Blood & Water.
Within Nigeria, Netflix is doing a lot right. Efforts range from the ephemeral (like creating a dedicated twitter account for Netflix Nigeria) to the significant (increasing the number of Nigerian content available on the platform). In commemoration of Nigeria’s Independence Day, it introduced a Naija to the World collection. The collection features over 90 Nigerian films and series that have received diasporan acclaim and featured prolific talent. It also includes new, exciting titles. Journey of an African Colony; The Making of Nigeria is an insightful docu-series from Quramo Productions. The movie, Oloture, tells a gripping story about human trafficking and prostitution.
There is more. In June, Netflix signed a deal with Mo Abudu’s EbonyLife to create a series-adaptation of Lola Shoneyin’s The Secret Lives of Baba Segi’s Wives and a film-adaptation of Prof. Wole Soyinka’s Death And The King’s Horseman. Even Lasisi Elenu’s Mama and Papa Godspower comedy series may be relaunched on Netflix.
Importantly, Netflix is working with a $15 billion original production and licensing budget for Africa. One that will enable Nigerian filmmakers achieve high-quality, globally competitive productions. Profit is Netflix’s clear priority and the continent offers incredible returns. According to Digital TV Research, revenues from streaming platforms are expected to exceed $1 billion in sub-Saharan Africa by 2024. Already, Netflix attracts 39% of subscribers.
But is this good enough?
In 2019, Techpoint Africa reported that Netflix had less than 50,000 subscribers in Nigeria. Digital TV Research added that Netflix only accounts for 1.4 million subscribers on the entire continent. To offer comparison, there were 60 million subscribers in the US! Meanwhile, MultiChoice currently has about 13.9 million subscribers, 40% of which are Nigerians. Clearly, there is a wide gap between these two giants, who are often referred to as competitors.
The cause of the disparity is singular – the high cost of Netflix subscriptions relative to the purchasing power of African households. Nigeria is the poverty capital of the world. When you are poor, you spend on essentials. Your disposable income is less. When you are poor in a country where data is expensive, you want to buy as little of it as possible. When you overcome the data challenge, you do not want to exhaust it on streaming, especially if you have to pay for subscriptions on top of everything. Ultimately, subscription better not be expensive.
Is Netflix reading the room?
Netflix and the Naira
Previously, three subscription plans were available on Netflix – Basic, Standard and Premium. In October, it announced the launch of two lower-cost plans aimed at smartphone users. The new plans are called Mobile and Mobile+. Mobile-only contracts were first tried in South African and Egypt.
For the lower price, they limit users’ flexibility. The Mobile plan only affords streaming on a smartphone and tablet while the Mobile+ plan includes the option of watching on a laptop. Notably, TV is excluded. But who needs TV?
This population of smartphone users is increasing in Sub-Saharan Africa. The GSM Association expects the number to reach 500 million by 2021. 101 million of them will be Nigerians. Netflix is offering N1,200 ($2.65) a month for its mobile-only service. This is much less than the N2,900 ($7.50) Nigerians have had to pay for a classic Netflix subscription.
Does this make a significant difference in Nigeria? 40% of Nigerians still live on less than one dollar a month. Iroko TV, a local streaming platform with the largest catalogue of Nollywood content gives access to over 5,000 movies. Iroko TV charges N250 per month. However, Nairametrics reports that the income from Iroko’s low-price plans has not been enough to cover its costs and the company is now scaling back its African operation to focus on wealthier viewers in the diaspora.
Again, can the relative poverty in Nigeria be helped? Nigerians are facing food inflation, hikes in the cost of electricity and petrol. Importantly, the price of Netflix plans are fixed in dollars, their naira equivalent is determined by the exchange rate. Nigeria’s reliance on crude oil exports means that the fall in global prices has driven the naira down. On 10th November, 2020, a dollar traded for 462 naira in the parallel market. Nigerians have never been this poor. Can they keep up? Can Netflix? Can it go even lower with its plans? Instead, would it focus on the few privileged Nigerians?
Nigeria will remain an exciting market for companies like Netflix. But its profitability will depend on how much it understands its customers’ pockets.