Asian fans of Orange is the New Black rejoiced as Netflix launched across almost all markets in Asia in January this year. Netflix has reshaped the entertainment industry, with its global user base streaming a total of 42.5 billion hours of video content in 2015. And local players are eyeing this opportunity.
Asia presents unique challenges to Netflix
One of the biggest obstacles for Netflix in Asia is the sheer size of the region and its social, economic and technological diversity. Challenges unique to Asia include the development of local and vernacular content, hitting the sweet spot with pricing model and different regulatory models.
A number of local competitors are eyeing Netflix’s estimated 6.1 million new international viewers in Q1 2016. And each one is more than capable of giving Netflix – whose shows are only selectively available across Asian markets – a run for its money. Hooq, iflix, StarHub Go, LeTV and even new free-to-air channel ViuTV in Hong Kong present attractive choices with local programming.
Banish buffering for streaming success
Netflix and its competitors will win or lose customer eyeballs based on the quality of experience they provide. Viewers, whether in Hong Kong or India, are extremely sensitive to quality of connection. With good network speeds Netflix can offer a great user experience and retain customers as it develops over 600 hours of local and vernacular shows.
Unlike cable TV, Netflix delivers its services through the internet, contributing over 37% of internet traffic during peak evening hours in North America during the first half of 2015. Major shows are being remastered in high dynamic range technology (HDR), offering an improved viewing experience, meaning bigger files and longer download times. New video encoding technologies and other initiatives will help address this issue but internet service providers (ISPs) must brace for a terabit tsunami.
Netflix uses the cloud and ISP networks to deliver its content to subscribers. As it grows in popularity, today’s networks, which have evolved over the years with disparate technology from multiple vendors, may not be fit for purpose. When millions download the latest episode of Jessica Jones at 8pm, it is only high performance “direct” connections from content owners like Netflix to the ISP networks that can avoid delays and bothersome buffering.
Optical technology will deliver crystal clear viewing
ISPs are already evolving their networks to meet the requirements of the Netflix era, improving network agility and removing technology hurdles to smooth streaming video. They should consider new models such as programmable optical networks that are more efficient at storing video content, as well as transporting, delivering and managing it. Technology is available today that allows ISPs to pack terabits of data down the same pipes, even over long distances.
In addition, advances in network management software can allow networks to automatically ‘reconfigure’ their capacity during peak viewing times and divert idle resources to areas where they are in demand. As an example, between 9am and 6pm, around 80% of network capacity in a city or town is allocated to offices, but between 6pm and midnight, it is diverted to households. This wasn’t possible with the ‘dumb pipes’ of a few years ago but today’s networks and technology make it possible.
ISPs should see Netflix and its competitors as a huge opportunity to improve their own ties with their customers by enabling top quality of service. With more and more entertainment being delivered via the internet, many more innovations are on the horizon. By creating a network optimized for video, ISPs can achieve long term customer satisfaction and retention. The future of entertainment is coming and it is online... so the time to act is now!
Anthony McLachlan is vice president and general manager for Asia Pacific at Ciena.