How Will Netflix Change Japan?

By Ryuko Sugimoto : Reporter of Toyokeizai
May 27,2015
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Mr. Reed Hastings came to Kyoto for the quarterly executive meeting (Photo by Fumishige Ogata)
Silicon Valley companies like Apple, Google, and Facebook have transformed the lifestyles of people and industry structures in Japan. The next industry-changing revolutionary is also coming from Silicon Valley. Netflix, Los Gatos, a California-based online streaming service, is planning to launch the service this fall.
Toyo Keizai talked to Mr. Reed Hastings, CEO of Netflix, who was visiting Kyoto for the quarterly executive meeting. This is his first appearance on the Japanese media. This is the first part in a two-part interview. 

--First of all, why did you take so long to launch Netflix here in Japan?

Well, it’s one of the first countries that we’re doing outside of Europe. We did the United States and then Europe and now Japan. It’s the first in Asia for us.

--In the United States, there are many SVOD players, but Netflix is the biggest boss in the market. Why do consumers choose Netflix?

Many consumers choose both, HBO and Netflix, or Hulu and Netflix because the content is exclusive like different channels on television. You’re right that we’re the most popular. In the U.S., almost half of Internet households have Netflix, whereas all of the other companies like Hulu are much smaller.

--What is the core value of Netflix?

We started to do SVOD almost 10 years ago. Now we’re very practiced, very good to make the streaming high quality, to make the user interface easy. We have over 60 million members around the world. That’s why people choose Netflix. It works very well. What’s happening is people are moving from linear TV to Internet TV. This is the really first year.

Growing and expanding

--You’re in the first year.

Really for the awareness because think of mobile phone 20 years ago. In 1995 or 1996, some people had mobile phones, but not most people. Then every year, the mobile phone gets better, and now everybody has one.

Similarly, Internet TV will grow every year for the next 20 years. With the Internet television, you can watch what you want when you want to. You can watch at four o’clock or at ten o’clock on a Sunday or on a Tuesday. You get to pick the show that you want.

--So for the next 20 years, Netflix will be bigger and bigger?

Yes, we’ll be bigger and bigger, but so will other networks. In the UK, the BBC has been very strong on the Internet. There’s BBC iPlayer, and it’s making it easier to watch BBC shows. Netflix is just one part of their entertainment, not the whole thing.

For legacy players like existing broadcasters in Japan, Netflix is seen as a threat. How do you manage the relationship with such broadcasters in Japan?

It takes some time for people to get to know us, that we want to contribute to do coproductions with the broadcast media and to export Japanese content around the world. We will work with content producers so that all Netflix members around the world get access to great Japanese content.

--Throughout the relationship with Netflix, what kind of benefit do the Japanese broadcasters get?

Two things. One is being able to produce content and sell it to Netflix, to license it both for the global market and in the Japanese market. Two, to learn what happens on the Internet. The threat to legacy players is not Netflix. It’s the Internet television. The whole industry is changing in every country. It’s not only in Japan. Netflix is the symbol of Internet television, but it’s really just one part of Internet television.

Focusing on satisfaction

--What’s your short-term goal in Japan?
In the first year, we have a big goal. When we launch it in the fall, we get one year to make everybody who uses Netflix love Netflix. What we realized is in the first year, we should only focus on the satisfaction because if the first year everybody who uses Netflix loves it, then in later years, two, three, you can grow very large.

--So for the first year, you don’t have a quantitative target?

Correct because if you have a quantitative target, then everybody works to that instead of satisfaction. That’s why we’re careful at the first year. Now second year, third year, we’ll have targets. We want to be a successful business. In the first year, it’s just satisfaction.

Many movie and drama mania are expecting Netflix’s original contents. Are you preparing any original content for the Japan launch?

At the time of launch, we’ll have our global original content, like Daredevil, House of Cards, Orange Is the New Black, and many other shows. We probably won’t yet have Japanese original content because it’s only a few months now until we launch. We will continue to work with Japanese producers to also do Japanese original content.

--What sort of original contents are coming from Japan?

Drama and anime would be the two big areas.

The complete version of the interveiw is published in May 23 issue of the Weekly Toyo Keizai (in Japanese).