Categories
Analysis

Why did Netflix fail to concur Russian online-cinema business?

Introduction

I will start with a phrase that may sound rather ridiculous to US citizens. Yes, in Russia only a very tiny fraction of people have a subscription to Netflix. In fact, many Russian people do not have a single subscription to an online-cinema. Due to some cultural backgrounds and ad technology in some distant parts of the country some people do not watch films online at all, and 93% of those who watch, use illegal resources. They are already a part of Russian culture; pretty talented people translate foreign films using jokes, irony and satire and make films only better! This is why many people hesitate to switch to official resources; they are adore foreign films that are modified a bit with Russian creativity.

But pirate websites is not the only problem Netflix faced when entering the Russian market. Low incomes, cultural backgrounds and heavy opposition joined forces.

Problems Netflix Faces

Firstly, on average, a standard Russian has an income of about 490 dollars a month. A subscription to an online video service costs anywhere from 3 to 10 dollars, an amount that is not negligible in this case when one has to consider all the other expenses people have to cover. With inflation hitting 6% a year, and salaries not growing by the same percentage, Russians are unwilling to spend money on content, which could be accessed for free through another source.

Secondly, not all Russian people adore the films that are suggested by Netflix: there is a very significant cultural difference between Russians and Americans. The times of the Soviet Union left a very large stain on Russian mentality. People do not want to see that some people lead a happy life somewhere in another part of Earth while they don’t. They want to see movies that reflect the problems they face. That is why genres such as arthouse are very popular in Russia. Netflix does not offer such films. Also, many Russian people, due to Soviet prejudices, are pretty intolerant, and they dislike the idea of seeing people of sexual minorities on their screens.

And thirdly, Netflix has to battle with three very serious opponents: Kinopoisk, OKKO and IVI. For many years, Kinopoisk was just a website about films, where people could discuss their opinions  and put marks —  it was like IMDB – but then it partnered with Yandex, one of Russia’s largest non-governmental companies to open a service that could try to fight with Netflix for the audience. Having an abundance of money and a very talented management, Yandex straight away started buying copyrights for Russian distribution of some of the most famous films and series, such as “The God Father”, “How I Met Your Mother”, “John Wick”, etc. It even received exclusive rights to show Warner Brothers’ “Justice League: Snyder’s Cut” from the first days of its release. Tigran Hudoverdyan, Yandex’s deputy CEO, uses the same tactics as he used when he single-handedly concurred Russian Taxi Business – he attracts customers by setting very small rates at first, and then lifting them when the customers are already acquired. Yandex are basically buying rights to distribute an abundance of famous titles from the largest American film companies, and even Netflix. Many films that one can usually find on Netflix can be found on Kinopoisk in Russia instead. The only issue is that Yandex is spending too much money, even considering the fact that is is Russia’s largest IT company. The question is whether Yandex will manage to gain enough from this business to cover all of the expenses.

Competitors of Netflix in Russia

The other two large companies: IVI and OKKO are less dangerous. Even though OKKO is controlled by Russia’s second biggest company, Sberbank, it is, most definitely, not the service they consider the most important due to great revenues from its banking investment and other IT businesses. But, OKKO has a lot of rights to distribute different sportive events such as the matches of English Premier League or the fights from Bellator MMA. IVI does not have such finances as the other two companies but it has a passionate collective. Opened by a former financier, IVI became a project of his life, and he desires to fight until the end with the giants that oppose him. Even though he does not have the money that his rivals have, he invests reasonably into content that would be unique to the service (something that OKKO and Kinopoisk also do, but rely on less). Also, the management of the company has plans to have an IPO on Nasdaq to receive money for the future development of the business. In 2019, the company already had more than 100 millions of dollars of revenue a year, and this number grew by 50% a year. At that time, IVI was the most popular Russian online media service. All of these factors made IVI an interesting company to invest into, but its IPO was shattered by the COVID-19 outbreak.

Conclusion

To conclude, the most important factors of Netflix’s failure to win dominance in Russia were low incomes, the cultural background of Russian people and heavy opposition from local companies. In my own humble opinion, the last factor is the most significant one.

Sources

Categories
Analysis

How does the history of Japan and America cause the difference between their current business strategies?

Introduction

Each country has its own unique history and background, but while some countries have existed since the BC era, other countries became nations only a few years ago. This article will focus on Japan, one of the oldest nations in the world, and America, one of the youngest. Despite their difference in age, America and Japan are known as developed countries that lead the world economy and business world. According to the GDP (gross domestic product), which shows the economic power of each nation, the United States is the country and Japan is in third place.

RankingCountryUnit: $1000000
1USA20,932,750
2China14,722,840
3Japan5,048,690
4Germany3,803,010
5UK2,710,970

Even though the two countries look similar in numbers, they have had completely different histories, cultures, and backgrounds. Such differences have a great influence on their individual business strategies and decisions as a nation, even still today.

Differences between the U.S. and Japan

One of the biggest differences is the “flexibility of companies”. Flexibility here refers to how typical companies in each country respond to new ideas and how they make decisions. In America, companies tend to adopt novel ideas, and/or techniques by receiving input from people with diverse perspectives and backgrounds. Such a management style can be described as innovative. On the other hand, people in Japanese companies are homogeneous, meaning that there are only very narrow perspectives. This may explain why Japanese companies tend to respect their existing techniques and work with their resources and do not implement new ideas as often or as easily. In fact, a survey shows that 35% of people said that America is the most innovative country whereas only 12% of them said that it was Japan. But how are these difference explained by the histories of Japan and the U.S.? 

First, we will take a look at how history affects the diversity of the two countries. For America, as widely known, Columbus found an American continent where native Americans had already settled. After his finding of the continent, many Europeans began migrating to the American continent and ultimately colonized the continent. This means that since its discovery, America has been a very diverse country, which it still is today. This in turn means that companies in America consist of a diverse community of people. As opposed to the history of America, Japan has developed with only a single race: Japanese. Because Japan is a small island country, not many countries have tried to invade Japan in its history. In addition, from 1639 to 1854, Japan was a closed country, which means that no one was able to come to Japan and there was no trade with other countries. Such conditions caused  Japan to become an even more homogeneous nation.

The second main difference is the ability of companies to adopt new ideas and approaches. In Japan, because the Japanese culture has been able to flourish for more than 2000 years without being confronted by other cutlures, there are many traditional ideas that people still respect, such as the existence of the natural state. One example of this is that some Japanese words that were first “invented” 1300 years ago to represent body parts and nature are pronounced exactly the same — examples of this are nose and flower as well as tooth and leaf. Because the idea of living “with nature” still penetrates widely in Japan, and there is a belief that long-lasting traditions should not be abolished, people tend to make more conservative decisions. Conversely, Americans have more realistic ideas of nature. For instance, Newton (even though he was from Europe) who found the existence of gravity considered the tree with an apple as an experiment objective, not something to see and enjoy the phase of the tree as the Japanese did. Also, because there are not many long-lasting histories in America because of the late independence, there would be less pressure for people to decide to adopt new, what could sometimes be seen as a bit risky ideas and/or techniques.

Conclusion

In this article, by unraveling the history of the United States and Japan, the huge role that the relevant history of the two countries plays in the business sector was discussed. History has greatly influenced each country’s business greatly, thus explaining the vast differences between the two countries. Based on this article, my suggestion is that businesses should be open to adopting new ideas and techniques, but at the same time, I do think that is important to follow some respected traditions at the same time and not abolish them. Generally, it is always interesting to see the connection between the history of the country and the current situation of the country and explore how the traditions have impacted such developments.

Sources

https://www.globalnote.jp/post-1409.html

Categories
Weekly Summaries

9th of August – 15th of August

The Taliban take over Kabul

On Sunday, the Taliban took over Kabul, Afghanistan’s capital city. The U.S. has had a heavy military presence in Afghanistan for twenty years, which now came to an abrupt ending. The collapse of Kabul comes a lot faster than even many experts had expected, meaning that most Afghans now have no way of getting out. President Ashraf Ghani fled the country to Uzbekistan after the finance minister already fled last week. Since then a council of Afghan officials has opened negotiations with the Taliban to discuss the takeover, according to the New York Times. Troops from the U.S. and other Western countries, which had been stationed in Afghanistan, started withdrawing in May. Around that time the Taliban started their offensive to take over Afghanistan. What the future of Afghanistan and the people who live there will look like remains uncertain, but prospects point to the worst.

Other News

  • Michael Calvey, an American businessman, was sentenced to a suspended sentence “for embezzlement charges” for 5 and a half years, according to the New York Times
  • After facing accusations of sexually assaulting 11 women, New York’s Governor Andrew Cuomo has resigned
  • The cost of coffee beans is up by almost 44% in 2021 compared to 2020, according to the New York Times

Categories
Weekly Summaries

17th of August – 23rd of August

Apple is worth $2 trillion

On Wednesday the 19th of August, Apple became the first U.S. company that is estimated to be worth $2 trillion. The value of shares increased by 1.4% during midday trading.

Categories
Books

The Finance Curse

The Finance Curse, which was written by Nicholas Shaxson, was absolutely mind-blowing. This book explains how different places have set up their whole tax system to be more appealing to companies who set up their headquarters in these countries. Although Shaxson focuses mainly on the case of London and tax havens such as Luxembourg, the book is nonetheless a must-read. Personally, I did not find the book too hard to understand even though I had no previous knowledge in the finance field when I started reading the book. In “The Finance Curse,” Shaxson explains how money flows from the customer to tax havens and how small companies may actually be owned by huge companies based in tax havens.