The process of globalization has created a highly competitive and integrated business environment, causing many firms to deem expansion into the global market essential for future success and profitability. Self-described “social ecologist” Peter Drucker claims in a TIME Magazine article that “Globalization is not an economic event; it’s a psychological phenomenon. It means that all of the developed West’s values—its mindset and expectations and aspiration—are seen as the norm” (Wartzman). Pretty heavy stuff. But what could the implications of globalization have on the future of, say, cable television? In recent years, the U.S. has seen the increasing trend of streaming video online, along with the exponential decline of cable TV subscriptions. Leichtman Research Group found that the top nine cable companies, including Comcast and Time Warner at the top of the list, lost about 1.7 million video subscribers in 2013 – compared to a loss of about 1.4 million subscribers in 2012 (The Companies and Leichtman Research Group, Inc.). Although cable companies have seemingly been in denial for the past few years, people have continued to unplug from cable TV. While streaming service provider Netflix has met continuing profitability here in the States, they have also been growing their business overseas. Just this week, Netflix began a weeklong rollout into six European countries that will constitute their biggest single international expansion yet, according to Sam Schechner of the Wall Street Journal (Schechner).
While Netflix still has room to grow at home, most of their lucrative business opportunities lie abroad. Because their services require no physical infrastructure, all the company has to do is ensure its media will stream at ample speeds wherever they wish to do business. However, while there may be little to no physical obstacles to overcome in the international expansion process, Netflix continues to encounter cultural issues outside of the U.S. More specifically, they have had to alter production schedules to cater to French and German tastes for dubbed, rather than subtitled, content. For German customers, the development of an alternative secure option for payment that doesn’t involve the use of a credit card was necessary due to the unpopularity of owning credit cards in the country, per the Wall Street Journal. Their most recent launch in France has brought to light some potential legal ramifications. Schechner explains, “Some government officials and media companies in France have also argued that Netflix’s arrival will undermine the country’s government-mandated system for financing local cinema and TV production” (Schechner). Since their European headquarters is not located in France, where the film and television industry is strictly regulated, Netflix has managed thus far to either avoid or negotiate around any mandated legal compliance with the country’s policies. CEO Reed Hastings states that he is just glad to have attention—controversial or not—drawn to the company.
It will be interesting to see how Netflix’s competition reacts to their most recent expansion into Europe. They are diving into direct competition with established European video streaming companies like Canal+, France’s main pay-TV operator, which has half a million subscribers for its CanalPlay. At this time, Netflix’s direct competitors at home, Hulu Plus and Amazon Instant Video have yet to bring their services international. The streaming business can get messy in regards to purchasing rights to shows and movies. It may be a source of resentment for many Americans to learn that popular shows like ABC’s “Modern Family” and CBS’s “The Big Bang Theory” are available in countries abroad, but due to the costliness of legal rights, aren’t available in Netflix’s home market. That being said, with the gravitation away from cable television, many consumers’ options are now limited to what is available for online streaming. In response to this trend, Time Warner CEO Jeff Bewkes has very recently hinted that a standalone HBO GO service was being “seriously considered” by the company, according to Business Insider (Tweedie). Offering premium channels like HBO on the Internet to people who don’t also subscribe to pay TV is a “viable and interesting” opportunity, in Bewkes’ opinion. Regardless of whether or not cable TV providers want to acknowledge it, the evidence is clear that the film and television industry is in the midst of an epic shift towards online streaming.
In an article from Pitt Business Review’s own Matthew McCready, he notes, “For college students, it has almost become a right of passage to own a Netflix account—or at least the password to your roommate’s” (McCready). It’s no news that Netflix has made its mark here in the States. Eventually, we will see whether or not Peter Drucker’s theory reigns true in the case of Netflix’s expansion across the globe. Will countries around the world embrace video streaming as consumers have in the U.S. and parts of Europe? People have realized the fundamental benefit of streaming is control. Being able to watch what we want, where we want, and when we want is powerful, and compliments the busy lives that most Americans lead. I think an important question to ponder is whether our preference for online streaming will translate into cultures with very different values and lifestyles.
- McCready, Matthew. “Streaming Over Cable?” Pitt Business Review. Pitt Business Review, 21 Apr. 2014. Web. 17 Sept. 2014.
- Schechner, Sam. “Netflix Launches in France in First Phase of Expansion.”Wall Street Journal16 Sept. 2014: B1+. Print.
- The Companies and Leichtman Research Group, Inc. “Major Multi-Channel Video Providers Lost About 105,000 Subscribers in 2013.” Leichtman Research Group. Leichtman Research Group, 14 Mar. 2014. Web. 17 Sept. 2014.
- Tweedie, Steven. “HBO ‘Seriously Considering’ Letting People Pay For Standalone HBO GO Service.” Business Insider. Business Insider Inc., 12 Sept. 2014. Web. 17 Sept. 2014.
- Wartzman, Rick. “What Globalization Really Means.” TIME. TIME, 23 Oct. 2013. Web. 17 Sept. 2014.