Company Trend Analysis - Three Key Reasons For Iflix's Success Over Netflix In Africa - AUG 2017


BMI View: Ifli x will succeed in SSA where Netflix is being hindered by its inadequate one-size-fits-all model. Iflix ' s success strategy will be based on three main pillars: content delivery solutions, adequate content localisation and an appropriate subscription payment model. G iven the expected growth in internet video entertainment demand in the region , Iflix is poised to become a powerful player.

Through its new South Africa-based Iflix Africa subsidiary, Iflix will launching its streaming video-on-demand (SVOD) services across five Sub-Saharan African markets in Q217/Q317, with more to be added in the months after launch. Much like its South East Asia and MENA operations, the content offered will include a vast range of TV shows, movies, and content developed exclusively for its African subscribers. This will include local and regional programming, as well as popular Nollywood productions.

Rapid Growth In Demand For Internet Video
MIddle-East And Africa - Data Traffic For Internet Videos
f = Cisco forecast. Source: Cisco Visual Networking Index

Although rival Netflix has been present in SSA since January 2016, Iflix will establish itself quickly as the dominant player in the region's SVoD market. The main reason supporting our outlook is that Netflix employs a one-size-fits-all model, whereas Iflix's business model is flexible enough to adapt to the local preferences and realities of SSA's online video entertainment market. Part of the difference in their business models comes from their geographic expansion paths.

Netflix, which up to early 2016 had been gingerly expanding mostly through the relatively developed markets of the Americas and Western Europe, suddenly jumped to all countries bar Mainland China, North Korea, Syria and the territory of Crimea. This sudden expansion has not allowed it to gain expertise and adapt its business model to the vast amount of emerging markets to which it now intends to cater. Iflix on the other hand, does have experience in offering services in emerging markets, as it has been successfully expanding through South East Asia and MENA before moving to SSA. There are three main pillars of Iflix's strategy that we believe to be crucial for its success in SSA.

Emerging Market Expertise Crucial For Success

The first of these pillars is its solutions for slow, expensive and mostly mobile broadband. A majority of Netflix's content is designed to be viewed on a large HD screen, a high viewing resolution implying heavy data use. With relatively low TV and PC penetration, slow internet connections that are mostly achieved through mobile devices, Netflix's offer is simply inadequate for the average customer in SSA on a technical basis. Alternatively, Iflix offers content in a resolution optimised for the smaller screens of mobile devices, better video compression methods that alleviate the toll on data traffic, and the possibility of downloading content for later offline viewing.

The second pillar is the popularity of the content offered. Iflix will be offering its usual library of films and TV shows, plus content to cater specifically to African subscribers, such as local and regional productions including the immensely popular Nollywood film industry. This, we believe, will have a much broader appeal in Africa compared with Netflix's content library, whose selection mostly caters to westernised audiences.

The third pillar of Iflix's success is its payment method. In the region with the lowest bank branches per head in the world (source: World Bank), online payments for Netflix's subscription service are out of reach for the large proportion of the SSA population without access to bank cards or formal banking. Iflix's subscription service can be charged against mobile credit balances through mobile operators' billing platforms, meaning that anyone that has a mobile subscription has the tools to pay for Iflix's services.

Cisco's Visual Networking Index forecasts the African and Middle-Eastern internet video market to grow six-fold in data traffic, from 1,219 petabytes (PB) per month in 2016 to 7,243 PB per month by 2020, the fastest growing region in the world for this period. If Iflix is able to cement its position in MENA and SSA in the coming years, it could eventually rival Netflix at a global scale.