On Monday, 27th September Netflix will launch a free, ad-free, tier in Kenya, specifically for viewing on Android devices, as it seeks to grow its paid user base in markets less familiar with its service and content. Netflix had launched a mobile-only price plan in Kenya in July 2021. The free tier offers around a quarter of Netflix’s catalogue, and won’t require users to provide payment information - just an email address and confirm they are 18 years of age or over. The company hopes that a sizeable share of users registering for access to its free service will decide to migrate to one of its paid services once they have tried it. The choice to make free Netflix available on Android reflects its dominance of the smartphone installed base over iOS in Kenya, and also that Netflix expects owners of Apple devices in Kenya to be prepared to pay for its premium tiers.
Strategy Analytics’ take.
Slow growth reported in Netflix subscriber numbers in 2Q 2021 has increased the pressure on Netflix to grow its subscriber base particularly as Disney, with its multiple services, is on pace to surpass Netflix as the largest SVOD provider. Strategy Analytics believes Netflix’s mobile tier has helped it to increase adoption in the Asia Pacific region. Netflix launched in India in July 2019, Malaysia in October 2019, and the Philippines and Thailand in March 2020. Netflix has seen its subscriber base rise by 24% YoY in the APAC region, substantially greater than across its other reported regions. We estimate around 20%-25% of new subs joining Netflix are from its mobile tier. Despite this success, Netflix now trail Disney+ in the region with an estimated 26.6M subscribers to Disney+ 31.1M as of Q2 2021. Due to the success of these mobile only tariffs, Netflix has followed up with launches in other mobile-centric and price sensitive markets, like Nigeria (July 2021), South Africa (July 2021), and Kenya (July 2021).
As Netflix struggles to growth in more advanced broadband markets, like North America and Europe, offering a free tier in Kenya demonstrates that Netflix is doubling down on subscriber growth in less developed markets, particularly ones where Disney+ has not yet launched and the Disney brand carries great weight. The free tier should enable Netflix to build consumer awareness of its service and content, which it hopes over time, will fuel demand for its paid service. If the free service proves successful in Kenya, we expect to see it rolled-out in other countries where familiarity of Netflix is currently limited.
However, far from being a slam dunk important questions remain for Netflix and other video providers in Kenya. How large is the market for a free Netflix tier? Will Netflix’s free service will provide a lift to revenue, or will it end up cannibalizing its paid service? Paying Netflix users may switch to the free tier and shift their spending to a competing subscription video service. Could Netflix’s free tier cannibalize the revenue of competing video service providers? Do Netflix’s competitors understand the value of their brand and whether it is strong enough to compete with Netflix’s free offer? As we look further ahead, what will be the impact of Disney+ when it enters Africa?