{"id":22057,"date":"2017-11-14T13:22:01","date_gmt":"2017-11-14T18:22:01","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/content-globalization-a-script-for-success\/"},"modified":"2017-11-14T18:47:36","modified_gmt":"2017-11-14T23:47:36","slug":"content-globalization-a-script-for-success","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/content-globalization-a-script-for-success\/","title":{"rendered":"Content Globalization \u2013 A Script for Success?"},"content":{"rendered":"

Take 1 \u2013 Cut!<\/strong><\/p>\n

Foreign governments have taken increasingly defensive tactics to impede the growth of globalization by US domestic firms localizing in their markets. This counter movement is particularly salient for digital media companies, where content can be antagonistic to cultural values and disruptive to existing delivery platforms.<\/p>\n

This tension hit a breaking point in Indonesia in January 2016 when PT Telekomunikasi Indonesia (Telkom), a state-owned telecommunications provider, blocked Netflix content shortly after the streaming service launched in the country due to alleged permitting and censorship issues. Telkom, which serves 85 million customers1<\/sup> and is Indonesia\u2019s largest internet provider, claimed to take \u201c\u2026this step to protect the Indonesian people.\u201d 2<\/sup> However, other internet providers in the country continued to deliver content to Netflix subscribers.<\/p>\n

Protectionist trends like this should be alarming to Netflix as well as other content providers looking for growth opportunities in foreign markets. Telecommunication companies are key to the content supply chain pipeline, providing \u201clast mile\u201d internet access directly to Netflix subscribers.\u00a0 Without delivery through these networks, content firms cannot compete in foreign markets.<\/p>\n

\"\"<\/a><\/p>\n

International governments have adopted widely varying stances on what type of content is banned for \u201ccultural, religious, or political issues\u201d 3<\/sup> and are often influenced by religion. Indonesia, whose population is nearly 90% Muslim4<\/sup>, has adopted some of the world\u2019s strictest censoring requirements. Navigating varying restrictions across international borders has become increasingly complex and burdensome for global content providers. However, adhering to these requirements on a country specific basis is critical for continuing operations.<\/p>\n

 <\/p>\n

Take 2 \u2013 Action!<\/strong><\/p>\n

Netflix quickly rebutted the allegations behind the Telkom ban. The company claimed that it was following local censoring requirements and that its business model was not akin to traditional Indonesian broadcasters and therefore should not be subjected to local permitting requirements. This strategy was important to avoid being shut down by the other Indonesian internet service providers. Given the importance of the Indonesia media market within the region and its \u201cfirst mover\u201d advantage ahead of other domestic streaming rivals Amazon, Hulu, and HBO, it was critical for Netflix to continue operations. Indonesia is Southeast Asia\u2019s largest online country5<\/sup> with an emerging economy and population that has shown a propensity for watching video content online according to a Financial Times Consumer Research report6<\/sup>.<\/p>\n

\"\"<\/a><\/p>\n

To regain access to Telkom\u2019s large customer base, Netflix next began to negotiate directly with Telkom to resolve the ban. The confidential negotiations dragged on for over a year until April 2017 when the two companies agreed to a partnership agreement. Netflix content would be offered as part of a bundled internet\/media package on the service provider\u2019s platform. Additionally, Netflix would remove or block any content that violated Indonesia\u2019s film censorship laws.<\/p>\n

It is unclear what Netflix\u2019s long-term defensive plan is in the country given Indonesia\u2019s shifting regulatory environment. In 2016, the government allegedly asked content companies to establish local offices in the country to conduct operations. The purpose of establishing local entities would be to curb foreign companies from taxation evasion as well as to gain more control over content, payment systems, and consumer data8<\/sup>. Regulatory restrictions like these represent opportunities for local governments to protect existing content ecosystems and inhibit rapid diffusion of market share by foreign firms.<\/p>\n

 <\/p>\n

Take 3 \u2013 Re-shoot!<\/strong><\/p>\n

There are several alternative steps that Netflix can take to smooth relations with Telkom and as well the Indonesian government.<\/p>\n

    \n
  1. Stricter self-censorship: According to 2009 Indonesia law, all content must be screened and approved by the Indonesian Film Censorship Board. However, an increased presence of foreign content companies operating within the country will elongate the bottleneck of the Board\u2019s approval process. To streamline approval and save valuable resources, Netflix can partner with the Board to ensure that all censored requirements are met for new content. This could be automated AI systems to replace manual reviews – an upfront administrative burden on the company, but one which has long-term benefits such as decreased throughput time and censorship costs. Given the amount of future content flow, these costs can be scalable when the approval \u201cmodel\u201d is adapted to censorship restrictions in other countries.<\/li>\n
  2. Another option to avoid this type of supply chain blockage in other countries would be to proactively partner with telecom providers to bundle the Netflix offering within the providers\u2019 existing service packages. An exclusive partnership would allow Netflix to build a strategic relationship with service providers while blocking access for other competitors and allowing for quicker penetration into content-watching households.<\/li>\n<\/ol>\n

    \u00a0<\/strong><\/p>\n

    Take 4 \u2013 That\u2019s a wrap!<\/strong><\/p>\n

    Resolving the ban was a time and resource consuming burden for Netflix. The outstanding concern is how the company plans to manage this type of issue on a global scale. Given the variety of local regulatory and censorship requirements around the world, how can Netflix mitigate protectionist situations like this in the 190+ other international territories in which it operates?<\/p>\n

    (793 words)<\/p>\n

     <\/p>\n

    Cover photo:\u00a0<\/span>Sarfraz Ali, \u201cIndonesia blocks Netflix over local laws on \u2018porn\u2019, \u2018radicalism\u2019 \u201d, Daily Pakistan Global, January 28, 2016, [https:\/\/en.dailypakistan.com.pk\/technology\/indonesia-blocks-netflix-over-local-laws-on-porn-radicalism], accessed November 2017<\/p>\n

    1<\/sup>Resty Woro Yuniar, \u201cNetflix Blocked by Indonesia\u2019s Top Telecom Provider,\u201d Wall Street Journal, January 27, 2016, [https:\/\/www.wsj.com\/articles\/netflix-blocked-by-indonesias-top-telecom-provider-1453896220], accessed November 2017<\/p>\n

    2<\/sup>Resty Woro Yuniar, \u201cNetflix Blocked by Indonesia\u2019s Top Telecom Provider,\u201d Wall Street Journal, January 27, 2016, [https:\/\/www.wsj.com\/articles\/netflix-blocked-by-indonesias-top-telecom-provider-1453896220], accessed November 2017<\/p>\n

    3<\/sup>Samantha Bookman, \u201cIndonesia blocks Netflix as local pay-TV operators, regulators, complain about its content,\u201d FierceCable, January 27, 2016, [http:\/\/www.fiercecable.com\/online-video\/indonesia-blocks-netflix-as-local-pay-tv-operators-regulators-complain-about-its], accessed November 2017<\/p>\n

    4<\/sup>\u201c10 Countries with the Largest Muslim Population in the World,\u201d May 26, 2015, [http:\/\/www.malaysiandigest.com\/features\/555150-10-countries-with-the-largest-muslim-population-in-the-world.html], accessed November 2017<\/p>\n

    5<\/sup>Source: \u201cSoutheast Asia on cusp of video streaming boom,\u201d FT.com, June 14, 2017, ABI\/INFORM via ProQuest, accessed November 2017.<\/p>\n

    6<\/sup>Source: \u201cSoutheast Asia on cusp of video streaming boom,\u201d FT.com, June 14, 2017, ABI\/INFORM via ProQuest, accessed November 2017.<\/p>\n

    7<\/sup>EM Squared FT Confidential Research, \u201cSoutheast Asia on cusp of video streaming boom,\u201d Financial Times, June 14, 2017, [https:\/\/www.ft.com\/content\/1b6cc61c-5115-11e7-a1f2-db19572361bb], accessed November 2017<\/p>\n

    8<\/sup>Source: Resty Woro Yuniar, \u201cIndonesia Puts Squeeze on Foreign Tech Companies; Proposed law would require companies providing Internet-based services to incorporate and pay taxes there,\u201d WSJ.com, April 2016, ABI\/INFORM via ProQuest, accessed November 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Isolationist actions by a foreign government have adverse effects on Netflix's global ambitions.<\/p>\n","protected":false},"author":10306,"featured_media":22223,"comment_status":"open","ping_status":"closed","template":"","categories":[2500,3239,143],"class_list":["post-22057","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-digital-media","category-isolationism","category-netflix","hck-taxonomy-organization-netflix","hck-taxonomy-industry-entertainment-and-recreation","hck-taxonomy-country-indonesia"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nContent Globalization \u2013 A Script for Success? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/content-globalization-a-script-for-success\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Content Globalization \u2013 A Script for Success? 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