uploads///Video on demand users in Japan

Netflix: Partnering with SoftBank for Launch in Japan

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Sep. 18 2015, Published 2:37 p.m. ET

Netflix in Japan

Netflix (NFLX) launched in Japan (EWJ) earlier this month. On August 23, 2015, Netflix announced its partnership with SoftBank (SFTBF) in Japan. Under this agreement, subscribers can subscribe to Netflix at SoftBank shops, electronic retailers, and through the SoftBank website and SoftBank call centers. Netflix apps (applications) preinstalled on SoftBank smartphones from October this year will allow customers to sign up for Netflix.

It’s interesting to note that SoftBank already operates an OTT (over-the-top) service called Uula available only to SoftBank subscribers. SoftBank also operates another OTT service called BBTV Next, which is also available to non-SoftBank subscribers.

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Netflix is offering subscription plans in Japan that range from ¥650 pre-tax (or ~$5.40) to ¥1,450 pre- tax (or ~$12.02). Netflix has always maintained that it intends to price its Japanese service at a price point close to its pricing in the United States. Japan will be the company’s first entry into an important Asian market.

Consumer electronics companies in Japan such as Sony (SNE), Toshiba, and Panasonic have already started integrating a Netflix button on television sets being sold in Japan.

According to a survey by Statista and as the above chart shows, the number of subscription video-on-demand (or SVOD) users is estimated to be ~11 million in Japan by 2020. Netflix entered Japan earlier this month, and the rising popularity of online video could help Netflix immensely in the long term to grab this subscriber base.

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Netflix to offer local content

Netflix has entered into an agreement with Fuji Media Holdings to provide local content. According to a June 17, 2015, report in The Street, Netflix has also reached an agreement with Japanese talent agency Yoshimoto Kogyo to produce original local content for Netflix. This move by Netflix indicates that it’s planning to target Japanese audiences with a mix of Japanese and English language content.

Netflix has learned from Hulu’s initial failure in Japan, which was expensive at around 2,000 Japanese yen, or $20 per month, and didn’t offer any local content. Early last year, Hulu’s Japanese business was sold to Nippon Television Network. Hulu is an OTT, ad-supported streaming service jointly owned by Fox Entertainment Group, The Walt Disney Company (DIS), and NBC Universal (CMCSA).

You can gain a diversified exposure to Netflix by investing in the PowerShares QQQ Trust Series 1 ETF (QQQ), which holds 0.81% of the stock.

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