Smart insights: Technology

It's time to think differently. Today's consumers are harnessing technology to reinvent themselves, their lives and their communities. They are changing the existing value system. Connected Consumers embrace freedom, acceleration and intimacy. Are you ready? The future is now.

To help you prepare for future consumer demand, we have chosen the ten key Tech Trends we believe will have the most impact on consumer needs and behavior in 2016 and beyond.

According to new GfK MRI research, today’s smartphone user is just as likely to be seeking mindless entertainment – playing a game or streaming a video – as connecting with friends and family through texting or other modes. 

Netflix’s recent announcement of their international expansion in 2016 is not unexpected, but still somewhat breathtaking in its scope. While it may seem natural to those in the United States, where Netflix holds a dominant position in the Subscription Video on Demand (SVOD) space and in other early markets where it is a well-known brand, but this latest overseas growth is not as much “a sure thing” elsewhere.

Eight key concerns for entering developing markets

Certainly Netflix will enter these new markets with a well-known brand name, which may be less connected to its actual content than to the fact that US-originating digital brands often have a leg-up on local brands. Netflix will generally appeal to affluent, Western-oriented consumers outside of the North American and Western European markets. But Netflix will have a number of concerns when entering these other developing markets that make up much of the dozens being added. These include:

• Local competitors in the Pay TV or streaming space may themselves have a dominant position. GfK works with a number of providers in the markets in which Netflix has newly launched to understand how their services are consumed. We often see a large cohort of subscribers actively viewing the kind of on-demand content that Netflix dominates in the US. These are consumers who are well served by streaming or on-demand content. For example, local South East Asian player iFlix has already built up an impressive half million subscribers in a short space of time.
• The streaming rights to local content of interest may be held exclusively by other services.
• The streaming rights to even Netflix’ own content may still be controlled by other providers, based on older agreements.
• Netflix’ original, exclusive Western-focused content may not have an appeal in different cultures. Again, GfK’s work in providing Return Path Data (RPD) services have taught us that local content is absolutely crucial in building a strong customer base – even in markets where the kind of Western-oriented programming in which Netflix concentrates is popular. Netflix itself recognizes this by focusing much of its strategy on creating local content for its various markets.
• There may be local laws regarding a certain level of locally originating content.
• Internet access in certain countries may be limited across the population or intermittent.
• The governments or entities controlling Internet access may arbitrarily cut access based on disagreement with content, or may use such power to censor or control what content is offered.
• In many markets, particularly in APAC, advertiser-supported or illegal websites are often well established as sources for watching video content. So there may be resistance to paying for content that consumers have traditionally accessed by other ‘free’ means.

Netflix’s big data advantage

That being said, Netflix has consistently outperformed expectations of industry experts and those in the financial markets. Its daring moves in the past have mostly panned out. And, aside from content, it has an understanding of its consumers – through the use of its own collected big data – with which few of its potential competitors can hope to compare. As for its competitors, frenemies, and partners – some being all three – the growth of Netflix raises questions that only third-party accounting of Netflix can answer. This way their competition or partnership with Netflix is on a more level playing field. What do you think about Netflix’s expansion? Do you see other challenges? I would like to hear your opinion as well.
For more information, please contact me at david.tice@gfk.com.