Even if Netflix is the sole reason for a consumer to pick up a credit card, it would be a step in the right direction towards a cash-lite societyA recent debate regarding Netflix centres around how the company operates in countries where it is not a registered legal entity. This is of particular relevance to Bangladesh. Netflix operates under a subscription model: A user pays a fixed fee every month which typically ranges between $8 to $12. In Bangladesh, consumers are unable to pay for the service in the local currency. Therefore, access to an international credit card becomes a prerequisite. Although foreign exchange transactions are heavily regulated, the Central Bank currently allows online purchases of goods and services, with a $300 limit on a single transaction. The caveat is that the card holders are liable for all tax or duty obligations. At present, there are no clear tax obligations to using Netflix. It is estimated that the company generated Tk200 crore in revenue from its Bangladesh operation last year without having to pay any taxes. On the other hand, local Over-The-Top (OTT) media providers such as Bioscope, 3rdBell, and Rabbithole are subject to local taxation laws on their services, which some people within the industry have termed “unfair.” However, the comparison between Netflix and local OTT media services is like comparing apples to oranges. Netflix is not a direct substitute for local on-demand video services -- a Netflix user in Bangladesh is highly unlikely to switch to Bioscope or Rabbithole if Netflix is banned in the country. The average Netflix user in Bangladesh is comfortable viewing content in English, actively follows original content on Netflix, has access to a Netflix account paid for using an international credit card, and high-speed internet. These factors collectively restrict the proliferation of Netflix in Bangladesh to a very limited, urban-centric audience. Without any native content, it might take years before the service makes inroads towards the rest of the population. Given the limited scope, there may be no impetus on the media giant to comply with local taxation laws at least in the near future. There may be positive externalities for Netflix in Bangladesh. The popularity of online video streaming increases demand for high-speed internet, which translates into more revenues for local ISPs and MNOs, as well as creates a business case for further investments in telecom infrastructure in the country. In a country where digital payments account for only 9% of total transactions, the country needs services with value offerings significant enough for people to make the transition to digital payments. Even if Netflix is the sole reason for a consumer to pick up a credit card, it would be a step in the right direction towards a cash-lite society. Perhaps most importantly, Netflix provides strong incentives to create and share world class content from Bangladesh with the rest of the globe. What’s worth mentioning here is the fact that despite beginning its journey in 1998, Netflix started to gain real success only in 2013 when the company produced its first series -- House of Cards. This resulted in shifting Netflix’s attention to producing and releasing a huge number of TV series annually and also restructuring the scope of its audience. So maybe for Netflix to truly gain mass popularity in Bangladesh, local content is going to be the key. The organization’s success in our country will require partnering with local content providers and investing more in local content. Some people are already leaving lucrative advertising careers in Bangladesh to explore just these kinds of content creation opportunities. Although, the question that arises here is: How costly will it end up becoming for Netflix to target individual countries with original local content? It’s true that each country has its own taste -- but that taste is not limited to the country’s geographical region. Netflix could target Bangladeshi communities locally and worldwide. Or the exact taste may also be hidden around the world. Perhaps the government should adopt a wait-and-watch approach for the time being, and not rush to limiting Netflix and the likes in Bangladesh. Incidentally, the National Board of Revenue has been losing over Tk200 crore annually from illegally imported tobacco products. That’s probably a worthier target for NBR’s attention. Anik Chowdhury is a Senior Associate and Mahee Durdana is an Associate at pi STRATEGY, a management consulting firm that specializes in helping clients transform ambiguity into opportunity.
Be it flight delays at the airport, long hours on the road stuck in traffic, or an awful headache after a long day at work, there is always room for Netflix, the online, video-on-demand streaming service that turned traditional broadcasting media on its head and drove a behemoth such as Blockbuster to the ground.
It is nothing short of a game changer -- a disruptive force that has significantly altered the way viewers watch “television” and film. There are no schedules, no long waits. Just pick whatever you want to watch, whenever you want, wherever you want, (though if you are in Bangladesh, you will be constantly reminded of the various confinements in regards to content availability and occasional fluctuation of the streaming speed), just hop on to your phone or computer or TV or just about any electronic device that supports audio-video and it’s “Netflix and chill.”
In 2016, Netflix announced its plans to expand into 130 countries outside the US. Bangladesh was on that list. The company hit a record 117.6 million active subscribers in the last quarter of 2017, with over 60 million subscribers outside of the US.
While these figures are impressive, Netflix has been struggling in the Asia-Pacific region. China has a complete ban on the service, and South Asia accounts for a small fraction of the total international audience. For example, in India, there are only 5 million active Netflix subscribers compared to the 75 million subscribers of the market leader, Star India’s “Hotstar.” One estimate puts the number of subscribers in Bangladesh at 200,000 only.
