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Netflix (NFLX) Pledges to Localize Payment Methods in APAC

Netflix NFLX is looking to localize payment methods in the Asia Pacific region to make subscriptions easier for streamers.

Instead of mandating the usual credit or debit card for their subscription, streamers can use alternative payment methods, including Unified Payments Interface (UPI), digital wallet and direct carrier billing.

According to Netflix, the number of new subscribers signing up with an alternative payment method more than tripled between 2020 and 2021. At the same time, the company added 16 new payment methods. The company added that it adheres to the payment card industry’s standards of keeping customer card data secure, which includes not storing CVV numbers.

Per The Global Payments Report, digital wallets will make up 72% of e-commerce transactions in APAC by 2025. Currently, digital wallets, direct carrier billing and bank-based payments are some of the most popular payment methods among Netflix’s new signups.

In India, Netflix was the first merchant to launch UPI autopay. In Indonesia, the mobile wallet service, GoPay, was the first e-money payment option that Netflix offered. Netflix handles retail payments such as gift cards, in addition to traditional credit, debit and prepaid cards.

Even in more mature markets, like South Korea and Taiwan, where card payments are still the norm, there’s a strong demand for direct carrier billing, along with an increased growth in digital wallets.

Netflix Eyes Asia to Address Subscriber Growth Woes

Netflix is setting its eyes on the Asian market to fuel its growth in the upcoming years after experiencing an unexpected retreat in the number of paid subscribers. In the first quarter of 2022, Netflix lost 640,000 subscribers in the United States and Canada, 350,000 subscribers in Latin America, and 300,000 subscribers in Europe, the Middle East, and Africa (“EMEA”). The Asia Pacific was the only region where paying subscribers grew by 1.1 million.

Asia-Pacific has been the engine of Netflix’s growth over the past year and is expected to be the biggest driver of further expansion. The Asia-Pacific region currently accounts for 15% of Netflix’s 221.6 million global subscribers.

However, the pace of revenue growth is the slowest since records began in 2017, after low-cost mobile plans were introduced in Asia and prices were slashed in India. The average revenue per membership fell 5% to $9.21 per month in the Asia Pacific, compared with a 5% increase to $14.91 in the United States and Canada.

Given the rising movie and original show production costs, these lower-priced plans might not be sustainable in the long term. Netflix has shown interest in bringing advertising to its platform. Although the plan will undoubtedly diversify revenue sources, Netflix might find it difficult to win market share, given the huge proliferation of ad-supported video streamers in these markets.

Moreover, this Zacks Rank #4 (Sell) company faces stiff competition in the region from competing streaming platforms, like Disney DIS owned Hotstar, and Viu, owned by Hong Kong-based PCCW Media. Netflix had 6.8 million subscribers in Southeast Asia, compared with Viu’s 7 million and Hotstar’s 7.2 million, at the end of 2021, according to data from Singapore-based media consultancy, Media Partners Asia.

Besides, the near-term outlook is not enthusiastic as Netflix expects to lose two million paid subscribers in second-quarter 2022, owing to significant competition from the likes of Apple’s AAPL Apple TV+ and Amazon’s AMZN Prime Video services in international markets.

Apple TV+ outbid Netflix to win the rights to Sugar. Apple TV+ is gaining a solid reputation, with Ted Lasso winning multiple Emmy Awards and CODA winning three Academy Awards.

Disney recently began offering its streaming service, Disney+, in 16 countries across the Middle East and North Africa. Given the breadth of content of Disney+, the streaming platform is expected to grab the second spot, with a subscriber base of 6.5 million in the region by 2027, trailing only Netflix, which is likely to have a viewer base of 11 million per Digital TV Research data. Amazon is expected to outperform Starzplay, with 4.8 million subscribers, to grab the third spot.

Nonetheless, Netflix is expected to add 5.29, 4.7 and 3.7 million subscribers in 2022, 2023 and 2024, respectively, in APAC.

The company has been leveraging the talent of local producers in Asia lately and some of its bets have turned into home runs such as Squid Game, The White Tiger and Crash Landing on You.

Netflix is bringing back its hit Korean urban fantasy action series, Sweet Home for two more seasons. Lee Eung-bok, who directed the first season of Sweet Home, is also set to helm the K-drama’s new seasons.

Recently, Netflix launched a remake of the popular Spanish series Money Heist for its Korean audiences. This production showcases the strong efforts made by the production team to test successful western titles become big hits in Asia as well.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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