Netflix (NASDAQ:NFLX) recently picked up its first original series for India, Sacred Games. The Hindi-English series, which is based on a best-selling novel by Indian author Vikram Chandra, takes place in Mumbai and focuses on organized crime, corruption, politics, and espionage.
Netflix calls the story "an epic masterwork of exceptional richness and power that interweaves the lives of the privileged, the famous, the wretched, and the bloodthirsty." The series will be co-produced with Indian film production company Phantom Films, and be available to Netflix subscribers worldwide after its release.
Another step in Netflix's overseas push
Netflix has expanded into 130 new overseas markets, including India, earlier this year. The company hasn't disclosed how many subscribers it has gained in India, but it told The Financial Express in February that the country was one of its "most enthusiastic markets," and that many people were signing up for its one-month free trial. India is considered one of Netflix's most important new markets, since it has the world's third largest number of Internet subscribers.
Netflix is now aggressively producing localized content to complement its core slate of U.S.-centered shows like House of Cards and Daredevil. Last year, it launched its first Spanish show, Club de Cuervos and its first French series, Marseilles. It recently picked up original series 3% from Brazil, Suburra from Italy, and an untitled period piece in Spain. In Japan, it launched a reality show called Terrace House and a new drama called Hibana.
Netflix is focusing so heavily on international viewers because 42% of its subscribers came from overseas markets last quarter, up from 34% a year earlier. Those members generated 36% of Netflix's revenue, and 93% are already paying members. Netflix's international revenue rose 57% annually during the quarter, easily outpacing 18% growth in the U.S. market. CEO Reed Hastings believes that international revenue will account for half of Netflix's top line in the near future.
Staying ahead of Amazon
Expanding overseas to offset slower U.S. growth is a smart way for Netflix to grow, but it's also likely a defensive move against Amazon (NASDAQ:AMZN). Amazon has aggressively expanded Amazon Video over the past few years with major distribution deals and original content. It recently launched a stand-alone Amazon Video option for just $9 per month to undercut Netflix's $15 fee.
Amazon has never disclosed how many people watch Amazon Video, but eMarketer estimates that the service reached 65 million users in 2015, while Netflix reached 114 million. It's important to note that "users" don't equal "subscribers", since multiple users can watch from a single account. However, those numbers indicate that Netflix reaches 75% more people than Amazon Video.
But now Amazon is also trying to expand overseas by leveraging its e-commerce lead to sell streaming video. In Japan, where Amazon is the dominant e-tailer, the company recently unveiled 12 original series including the historical time-travel drama Magi, spinoffs from popular kids' franchises Kamen Rider and Ultraman, variety shows, and manga adaptations. Amazon produces less original content than Netflix, and it hasn't aggressively expanded video to as many markets yet. But it's already the third largest e-commerce site in India, and it could eventually use that market share to launch original shows of its own.
Can Netflix revolutionize TV worldwide?
Even before Netflix officially went global, many of its top shows had become immensely popular overseas due to piracy. During the International Indian Film Academy Awards in 2014, Kevin Spacey told reporters that he discovered that "House of Cards is really big in India", but that popularity was odd because "Netflix doesn't exist there yet."
Most companies consider piracy a bad thing, but it arguably helped Netflix establish brand recognition across markets like India. Therein lies Netflix's strength -- its creation of high-quality original content has established it as both a production studio and a streaming service. It's a unique business model, which most of Netflix's rivals, including Amazon and Hulu, have yet to fully replicate.
By launching quality shows in India, Japan, and other countries, Netflix could gain plenty of new subscribers to reduce dependence on the U.S. market. But as it grows internationally, Netflix will likely need to overcome similar challenges with distributors and internet service providers, which have constantly weighed down its margins.
Leo Sun owns shares of Amazon.com. The Motley Fool owns shares of and recommends Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.