Netflix Expands, But How Will It Cope?

Netflix Expands, Can The CDN Cope?

This week, Netflix expanded significantly, adding 130 new countries. Why now? Well, that’s likely due in part to broadcasting rights and Netflix’s need to boost growth. While Netflix has certainly become mainstream technology and hugely disruptive to the TV industry in the United States, how will it do in the developing world?

Of course, there are business constraints. Getting broadcasting rights for the local shows customers want, language constraints and attracting customers who currently use alternatives are all on this list. But, in my opinion, many of the key problems are technological. A few of the biggest ones include:

Viewers Need Sufficient Bandwidth

It is great to make the streams available, but in many developing countries, consumer bandwidth is relatively expensive and/or generally unavailable. If potential viewers don’t have enough household bandwidth to watch videos, Netflix’s potential market is greatly reduced.

Netflix Needs To Deliver

Netflix has built its own CDN to deliver video effectively in the US. Following significant investment, Netflix has been incredibly successful. But, building a global CDN is much harder, especially in many developing markets, like India. Building their own global CDN or hiring another company will be a significant effort. We’ll have to see how Netflix handles this.

Different Technological Cost Structures

In the US, when Netflix works with ISPs to deliver content, it is on a flat-fee basis. In many foreign countries, ISPs have a pay-per-data business model. Since Netflix will still rely on ISPs to deliver video abroad, the differing cost structures could hugely change the underlying value to their business.

Netflix is without a doubt a revolutionary company. However, their global expansion will raise many new questions. That said, Netflix has continued to impress the video streaming community and I do not expect this to change. It’ll be interesting to see how Netflix performs and adapts as they expand beyond the developed world. This is something to keep an eye on, as the company is a definite trendsetter and capable of developing significant innovations in the content delivery space to better fit their needs.

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