Netflix and chill - for free

Netflix Draws More Questions Than Answers With Freebie Gamble In Kenya

By  |  September 21, 2021

Within the next few weeks, the content on Netflix, or at least a small portion of it, will be accessible for free on mobile for users in Kenya, coincidentally the country with the highest proportion of internet users in Africa, with 85.2 percent.

On Monday, September 20, Netflix revealed it is launching a free mobile plan in Kenya as the global streaming giant looks to tap the East African nation that is home to over 20 million internet users.

Without requiring intending users to input any payment details, mobile users in Kenya will gain access to around one-quarter of the movies and television shows on the world’s leading video-on-demand (VoD) streaming platform. It’s all part of a plan to attract new users and sort of ‘whet their appetite’ while banking on the possibility of ‘free users’ becoming ‘paying users’ after an indefinite ‘trial’ period.

“If you’ve never watched Netflix before — and many people in Kenya haven’t — this is a great way to experience our service,” Cathy Conk, Director of Product Innovation at Netflix, wrote in a blog post.

“And if you like what you see, it’s easy to upgrade to one of our paid plans so you can enjoy our full catalogue on your TV or laptop as well.”

At a time when Netflix is witnessing a decline in new users (it added only 1.5 million new paying subscribers in the quarter that ended in June this year, lower than forecasted), rolling out a free plan in an exciting, digitally savvy market (with the possibility of launching the same in other similar countries if the initial test proves successful) sounds like a good way to push the subscriber numbers up.

However, there are certain unyielding factors peculiar to such frontier markets that suggest converting free users to paying users is easier imagined than executed.

In Africa, in particular, VoD remains largely unexplored as a result of non-consumption linked to a dire micro-/macro-economic environment. To put it in the words of Jason Njoku, Founder/CEO of iROKO; Africa’s foremost VoD company, “Africa is functionally poor.”

It would be recalled that last year, in the midst of the economic impact of the pandemic, as well as currency devaluation and a hostile regulatory environment in its home country, Nigeria, iROKO was forced to pause its pursuit of growth in Africa and focus on its international business which accounts for 80 percent of its revenue.

It was also revealed that focusing on markets abroad makes economic sense for iROKO since its annual average revenue per unit (ARPU) in North American/European markets is around USD 25.00 to USD 30.00, whereas, its annual ARPU value is between USD 7.00 to USD 8.00 in Africa.

In other words, the lower earning power,  lower purchasing power, and lower disposable income in African markets, compared to more developed regions, makes the continent a very tough nut to crack when trying to grow an ‘internet business’ that sells a service that is fundamentally inessential – especially as there’s a general situation of scarce resources being stretched to meet many pressing needs.

A further testament to this is found in the fact that the ‘Facebook app family’, for instance, (i.e Facebook, WhatsApp, and Instagram) – which are largely the most dominant in Africa and can serve as a reliable approximation of the total addressable internet market on the continent – is found to record ARPU figures that are much higher in North America (U.S. and Canada) than “Rest of World” (Africa included).

For example, Facebook recorded an ARPU of USD 53.56 for North America and USD 2.77 for Rest of World in the fourth quarter of 2020, per the company’s financials. That epitomises the massive gulf-in-class that exists between the different regions when it comes to monetisation.

“In the absence of a special ‘Africa’ pricing, usually heavily subsidized by cashflow (from international operations) or investors’ capital, our people wouldn’t be able to afford most of the things we enjoy today,” Njoku wrote in a blog post earlier this year, tersely titled: “When 95% of your customers can’t afford $30/year.”

That’s hardly negative bias; it’s the harsh reality. And that’s why streaming remains something of a known nice choice that the mass market can only mostly afford to do without at this point.

Of Africa’s 1.3 billion people, less than 4 million people (just about 0.3 percent) are paying subscribers on video streaming platforms, according to one estimate, with Netflix leading with around 2 million subscribers while the likes of iROKOtv, Showmax, Apple TV+, Disney+, and Amazon Prime Video have a smaller share.

Of course, this suggests immense opportunity as a large part of the African market is yet untapped but it’s hard to see how a few weeks of ‘free Netflix’ would encourage a statistically significant number of new users (who have ignored Netflix all this while mostly due to economic constraints) to suddenly whip out their cards and become loyal paying customers on repeat. For what it’s worth, this ‘freebie-type’ play didn’t work out too well for iROKO in the past.

Indeed, iROKO ran a ‘free movie a week’ offer for around 2-3 years. It attracted tens of thousands of people who used it weekly. But conversion was less than 2 percent ultimately, according to Njoku. “Why didn’t they pay? They had no intention of ever paying. Ever ever ever. They were okay with the 1 movie a week. So we turned it off,” he mentioned in a tweet.

In recent times, Netflix has increasingly pursued faster growth by offering its service for free, or at little to no price, especially in the developing world.

As highlighted by TechCrunch, the streaming giant has supported free trials in many markets, offered a tiny portion of its original movies and shows to non-subscribers, run at least one campaign in India when the service was available at no charge over the course of a weekend, and launched cheap mobile-only subscriptions in Nigeria and few other countries.

Although its haul of 209 million subscribers worldwide and nearly 4,000 films puts it ahead of competitors, there’s no hiding from the fact that Netflix has the likes of Amazon Prime Video and other streaming services breathing down its neck as they all try to win customers outside of the U.S. to maintain faster growth rates.

For Netflix, this has meant surmounting the hurdles responsible for non-consumption by making streaming cheaper, and sometimes free when attempting to attract new users that would otherwise not bother, as in the latest case with Kenya.

But the end-game of this strategy – which implies scoring a significant conversion rate out of the swathes of people who are likely to jump on free or heavily subsidized plans – looks anything but a straightforward affair in these parts given the nature of the market and the dire economic environment, not to mention all the fuss about the issue of internet accessibility and affordability.

Of course, things are likely to improve as VoD becomes more popular (and more affordable) in Africa over the next few years, but for now ‘free plans’ aimed at potentially luring in new paying subscribers out of would-be freebie seekers does seem like more of a gamble with a slim chance of a pyrrhic victory than a real shot in the arm.

Feeatured Image Courtesy:

Most Read

Nigeria’s Crypto Traders Take Business Underground Amid War On Binance

Nigeria’s heightened crackdown on cryptocurrency companies over the naira’s slide is driving the

Kenya Is Struggling To Find Winners After Startup Funding Boom

Kenya, the acclaimed Silicon Savannah, is reeling from turbulence in its tech landscape.

The New Playbook Behind Private Equity’s Quiet Boom In Africa

Private equity (PE) investment in Africa has seen a remarkable upswing in recent