#NetflixInKenya: A Commentary

Some ramblings on the challenges that Netflix will have to solve in the Kenyan market.

I was just taking a break from a coding sprint and peeked on Twitter trends in Kenya, the hash tag #NetflixInKenya caught my eye: as always, Kenyans On Twitter (KOT) are a funny lot — and a force to reckon with, by the way.

Kenya is a promising market, but Netflix has 3 main problems to solve:

Internet Access

I’m not talking about the unconnected millions in the rural areas….i’m talking about the nature of internet access.

The best market offer by Orange, a mobile service provider costs K sh. 2,999 per month — roughly USD $ 30.

But don’t be fooled by the unlimited bit, your data usage has a cap on it, so you’ll stream at a good speed for about 15 days — then get that nasty text from Orange informing you that you’ve exceeded their fair usage policy and you’ll now access internet at a lower (read crawling ) speed.

So the real cost of a basic Netflix bouquet (at USD $ 7.99) is actually USD $ 37.99, equivalent to K sh. 3,799.

This is at ceteris paribus — what Economists refer to as all other factors held constant. But as you already suspect, economic factors are rarely constant.

Only a handful of Kenyans will fork that kind of money for a streaming service.

Netflix Accessibility

One of those factors other factors assumed to be constant — you need to own a computer of sorts (laptop,tablet,smartphone) or a smart TV.

Now in terms of basic UX in Kenya, watching is mostly done on t.v which means that for the average household to watch anything on Netflix, they’ll require a smart t.v — that’s a stumbling block in the adoption curve.

You see…smart t.vs are not a given for the average urban Kenyan household: that’s why decoders played a major role in the switch from analog to digital television.

So unless Netflix makes partnerships with the likes of GoTV, Zuku and StarTV among other decoder service providers — it will just be a fringe product used by a select few.

Here’s an interesting fact — all Kenyan households that own a t.v also own a decoder: thanks to the digital migration that happened in 2015.

Piracy Is Normal

Tech savvy folks stream movies from sites like movie25 on their computers whilst the rest source for movies and series in nearby video libraries.

Video libraries in Kenya constitute a formidable stumbling block for Netflix, mainly because:

1. They download and burn torrents on DVD disc for sale at USD $ 0.5 or K sh 50 — buy 4 movies and get one free.
2. If you bring your USB flash disk or external hard drive, a movie or series season’s price drops down to USD $ 0.3 or K sh 30.
3. Plus they actively offer movie recommendations based on the customer’s movie taste or just quick street-smart profiling of a new customer.

Point (1) is very important for the majority of Kenyans, they can access entertainment in an easy-to-understand medium (good old DVD disc) at a dirt-cheap price.

Explaining how Netflix works is like pitching the virtues of using bitcoins to the average person in Africa — it’s a tough sell.

The government of course has made piracy of this sort a crime — yet local businesses get registered as video libraries( read movies & series pirates) and actually pay taxes.

This is a tree that the government of Kenya doesn’t consider worth shaking, so video libraries are here to stay.

So dear #NetflixInKenya, you’ve got your work cut out — let’s see how you innovate around this, including the use of Swahili names for your products: a tactic that has been successfully used by the leading teleco (Safaricom), over and over again.

Best of luck.

Update: A Round Up of Critiques

As with any other form of conversation, readers have a right to reply in form of critiques — in other words, constructive criticism.

1.Netflix Accessibility

With reference to the associated hidden or indirect costs of a subscription, Mercollo’s thoughts are as shown below

The conclusion from our brief Twitter exchange was that the relative cost of a Netflix subscription in Kenya was higher: given the difference in terms of purchasing power of a dollar in Kenya — where USD $ 1= 100 Kenyan shillings — as compared to the U.S.

On another article by Sidney Ochieng, he argues that Smart TVs are not a stumbling block in terms of access to Netflix as a service, since some of the set-top boxes bought by Kenyan households during the digital migration can run apps like Netflix .

Of particular note here is Safaricom’s BigBox — a digital t.v decoder (set-top box) flush with options. But there’s a salient feature that Ochieng’s analysis misses when he cites examples of options available to Kenyans — switching costs:

1. What to do with the old decoder once you upgrade when reselling options are almost non-existent given the low cost of a new standard decoder.
2. Why should a user pay USD $ 39 per month, up from USD $ 8 per month

These two salient switching costs are not to be quickly dismissed: mass adoption of Netflix is a tough sell, but not impossible

The option of Netflix signing deals with Telcos is plausible, DSTV has done it — but this limits access to smart t.vs and computing devices only: issues we had already addressed earlier on in this post with reference to the UX peculiarities of the average Kenyan household when it comes to watching of content.

2. Piracy

Ochieng states that:

in an analysis of cost done by a Kenyan tech website, Techweez, the cost of buying DVD to that of paying for Netflix is comparable.

So let’s do the math. If the real total cost of a basic Netflix subscription is at USD $ 38 or about USD $ 1 per day — which is equivalent to buying 2 DVDs from the local video library per day. Then the cost of buying a DVD to that of paying for Netflix is comparable — at ceteris paribus.

But it’s hard to find an average household that watches at least two movies per day after a long day at work — or 14 movies/series per week in total: that’s a corner case, so empirically the stated cost analysis makes sense: but in reality, that analysis doesn’t hold water.

The subtleties of human behavior — that’s what most products struggle to understand for a feasible product-market fit.

Lastly, Ochieng argues that Netflix’s recommendation algorithms will beat the convenience offered by the local movie guy — eventually.

In the meantime , very few Kenyans consult algorithm recommendations when choosing a restaurant, buying a car, or choosing the next hot series— you ask someone you trust, like the local movie guy, family or friends.

So the question is, am i pessimistic about Netflix’s success in Kenya?

NO.

I’m just being pragmatic: eventually, end users determine the success or failure of a product.