Netflix rolls out its online video distribution service in Japan


Netflix Inc., the world’s largest online video provider, has rolled out its online video distribution service (see below) in Japan.

The streaming giant is attempting to break into what can be a challenging market, in a country where free TV viewing is taken for granted. Since the service is relatively unknown in Japan, Netflix is teaming up with companies like SoftBank to raise its profile. SoftBank stores began accepting applications for Netflix on Wednesday.

With other major players like Amazon Japan stepping into the video streaming business, competition is expected to ramp up in the face of existing services by telecommunication giants and commercial TV networks.

An aggressive target

Netflix Chief Executive Officer Reed Hastings told The Yomiuri Shimbun on Wednesday that the company is aiming to have 10 million households sign up over the next seven years. This aggressive target would give it more than twice as many as rival NTT Docomo’s dTV service, which has the most subscribers in Japan with 4.53 million.

Netflix will exclusively offer two programs by Fuji Television Network Inc., including popular reality show “Terrace House.” In cooperation with entertainment firm Yoshimoto Kogyo, Netflix will also exclusively distribute a video adaptation of comedian Naoki Matayoshi’s novel “Hibana”, winner of the prestigious Akutagawa Prize.

Netflix subscriptions can be made online and used on devices like smartphones for a monthly fee, ranging from ¥650 to ¥1,450 (S$150 to S$323) excluding tax. The rates are slightly lower compared to the United States, where subscriptions start from US$7.99 (about ¥960, or S$11).

SoftBank users can sign up for Netflix at SoftBank stores, and electronics retailer Bic Camera has also started selling prepaid subscription cards. Both firms expect the collaboration to bring more customers to their stores.

Working with TV stations

Many rivals are also looking to tap the video streaming business. Amazon Japan is expected to launch its own on-demand streaming service for paid members in late September, and Docomo’s dTV has been streaming concerts live since July.

Culture Convenience Club Co., which operates major DVD rental chain Tsutaya, launched a subscription service in August costing ¥933 a month. Users can also opt for a ¥2,417 monthly plan allowing unlimited use of its other services as well, including delivery service for DVDs and other products.

Video streaming provider Hulu, operated by a subsidiary of Nippon Television Network Corp., had more than 1 million subscribers for its monthly ¥933 service in March. The company said there were more subscriptions after the first and second episodes of a serial drama featuring members of Japanese pop idol group AKB48 were aired on NTV in August, with the rest aired on Hulu.

Eyeing the lucrative growth potential of the video streaming market, more and more TV stations are forming alliances with mobile phone companies. TV Asahi and au phone operator KDDI Corp. formed a tie-up in the video streaming industry in August.

Large hurdles

The extent to which TV networks will offer their programs to other companies’ streaming services is uncertain.

Japan’s video streaming market is expected to grow from about ¥130 billion in fiscal 2014 to ¥200 billion by fiscal 2020, according to estimates by Nomura Research Institute, Ltd., compared to the total sales of key commercial TV networks exceeding ¥2 trillion.

TV stations dominate the production of programs, and earn significant ad revenue by airing popular TV programs on terrestrial networks.

Yoichiro Miyake, a senior consultant at the Nomura Research Institute, said streaming providers would need to provide attractive programs.

“Otherwise, they’ll find it difficult to entice customers from rival services or gain more subscribers,” Miyake said.

Online video distribution service

Provides subscribers with unlimited on-demand access to videos through smartphones, tablet devices and TV sets with an Internet connection. At a fixed rate, which is typically monthly, users can stream a range of content including movies, drama and anime.