How to build an audience in Japan

At the recent Japan Content Showcase in Tokyo, Netflix Japan vice president David Lee outlined the streaming giant’s strategy in a market that usually prefers its own content to US television dramas.

Lee gave a candid on-stage interview where he discussed early audience reaction to Netflix, which launched in Japan in September, and the company’s local content strategy, which is regarded as a basic requirement for building a mass-market audience in Japan. He also talked about finding an audience for Japanese content overseas:

Q: It’s been two months since you entered the Japan market. How has the service been received?

A: We’ve been very encouraged by the early results. We had conservative but realistic expectations for how we would do in market. Focused on the long-term, we believe the market is one we should invest in over the next 10-15 years and we know it will be a long road to go down. We’re happy with the start and happy with the early take up.

Q: What kind of content are Japanese viewers interested in and how are they viewing it?

A: Netflix outside of Japan is primarily a US service and it’s mostly been Hollywood viewing in the US, Europe and Latin America. We knew in Japan we would need a different approach so we entered with a more aggressive stance in local content.

The early results show heavy engagement with Japanese content, but also really strong engagement with Hollywood among original series, which to date haven’t had awareness and exposure in the market. Daredevil was not marketed but is among our top shows, which we’re very happy to see.

Q: What kind of people are viewing the content?

A: Consumption is probably divided into two camps – there’s a population of early adopters who love US content and are gravitating towards shows like Daredevil and Orange Is The New Black – it’s an easy sell to that crowd. The challenge is around the mass-market consumer – those subscribers who are familiar with Japanese content and watch Fuji TV and TV Asahi – so that number base is engaging with the local content in a strong way. Our first two originals with Fuji TV are doing well for us.

So there’s definitely an early adopter audience – we see that in every market we launch in – who watches global entertainment, so we’re naturally going to find that audience easily. One thing that has been interesting is that we’ve had a great partnership with Softbank in Japan. They have thousands of retails locations. It’s an interesting touch point for potential members to introduce somebody to this new service who might not have found it on their own. We have an interesting mix of subscribers and, as we’ve seen in other markets, it will become more mass market over time. Our job is to figure out what content is resonating with our crowd and programme around that.

In the US, we are in one out of two broadband households, so we’re very mass market. Original series are a great lens to look at this question. House Of Cards was our first big original; it looked a lot like something on HBO, and as we expanded the membership base, we extended this type of programming, commissioning Hemlock Road, which is a youth-skewing horror show that resonates in mid-America, but not Los Angeles or New York, where House Of Cards does well. Then Grace And Frankie is targeting older audiences.

Really we are programming to the audience we have – programming that next set of subscribers that we will get over time. Terrace House, our first original with Fuji TV, is a great example of a show suited for a young tech-savvy audience that will gravitate to a service like Netflix. But over time we might want to programme for an older audience. As the audience expands, your programming mix expands.

Terrace House is really aimed at early adopters – it resonates well with young 20-somethings. It’s aspirational reality TV, which is not typically something we would do as an original, but the fanbase was so passionate about the show that it made sense and was an easy one to say yes to. Over time we will have this early audience that is young but the goal is to become more mass market in Japan.

It’s easy to try to compare different markets to each other and draw parallels, but what we’re finding over time is that no two countries are the same. Last year when we launched Germany, Austria and Switzerland together, we found that there is distinct viewing behaviour in the three different countries. As we launch and get more data, it makes us that much smarter about the nuances. In Japan, the view was that it would be very unique and different and that was proved in the data.

David Lee Netflix

Q: How else does data analysis inform your programming decisions?

A: You can look at the data as deeply as you want to and what we’re trying to do is find content that is compelling for a certain audience segment, not necessarily content that appeals to everyone on our service. If we can match economics to the potential size of that audience, then we will keep making that kind of content over and over again.

You’ll find us doing lots of documentaries, which is not mainstream, but for people who love documentaries it’s been really great. It’s been an interesting piece of the business for us. There’s a lot of benefit in having Virunga [Orlando von Einsiedel’s documentary about Virunga National Park] nominated for an Academy Award.

Q: Do you plan to distribute your Japanese–language originals globally?

A: Global is our North Star and one of the main tenets of our strategy. We have about 70 million members today, we’re expanding across Europe, and will launch globally in 2016. We have audiences in other parts of the world to have that cross-pollination.

So we’ll see – there are clear opportunities and less clear opportunities. Anime is a clear one as it has a passionate fanbase in almost every corner of the world. When we launch next year globally, we will have an efficient way to reach those fans wherever they are. Even if the fanbase is small in each country, when you add all that together, we will have a robust audience for anime. We’re excited about distribution in all markets, but we are letting our technology and algorithms find new potential audiences for anime that haven’t been reached before.

Q: What about Japanese drama?

A: In the past, it hasn’t travelled well outside of Asia, but for us there is really no logical reason why it wouldn’t. If French and Nordic drama can travel then there is no reason why Japanese drama can’t travel to other countries. We are excited to discover the potential over time.

Q: Marketing has been one issue – are you going to put efforts into marketing the content also?

A: Yes, I think a really interesting example is Narcos, which was released a few months ago and been one of our biggest global shows to date and is 50% Spanish-language. That’s been embraced in every market we currently operate in, including Japan. The marketing behind Narcos in Japan has been pretty modest – we’ve not pushed it as hard as Terrace House, but it’s naturally finding an audience because of the quality of the content. That’s a great example of the tip of the iceberg, finding the big global audience for things that are super local.

Q: Do you also see potential for Japanese films?

A: To date, distribution of great Japanese films has been fairly limited due to the inefficiency of the current landscape; inefficiencies in terms of distribution, but also in finding new audiences for these films. If you subscribe to Netflix and we recommend you watch a great Japanese film or series, you don’t have to pay incrementally; you can watch for five minutes and quit. The fact is that it’s there, among many other things you can possibly watch, so it’s about getting people to discover and try new stuff.

Q: How are you working with Japanese companies?

A: We view subbing and dubbing of any show we do as just a basic requirement, so we’re just going to do it and make that content available in all markets we operate in. That is the bar and we will see if we find an audience for that content. Narcos is finding a huge audience in the US, which is unheard of for a subbed show.

We also did Lilyhammer for Norwegian state TV, which has people speaking in English and other people responding in Norwegian. It’s unlike anything else that has been seen on TV, but it found an audience and worked out great for us. So that is the extreme end of two different languages being spoken.

There’s a great opportunity for well-produced shows with modest budgets – Korean shows, telenovelas. One easy way to derisk programming decisions is high production values. We’ve got unlimited shelf space for great content and viewers can choose to watch House Of Cards or something produced for few hundred thousand dollars. We’re just at the beginning stages of that shift in the market. Japanese content makers are interested in working with Netflix.

Q: What about the concerns some people have about their relationships with other windows?

A: In general, premieres on Netflix are exclusive to Netflix for period of time, which is dependent on the terms of the project and the situation, so there are no hard and fast rules. We like exclusivity but its very unique, project-by-project and partner-by-partner.

There’s an amazing opportunity going forward to think broader about the current state of Japanese content, whether its distributed here or outside Japan, and we would encourage people to think broader, bigger, globally and possibly to get shows watched by a global audience. It’s a big mission we’re on and we will learn along the way, but we think it’s a great opportunity out there.