Netflix seeks to electrify growth in rural Japan with utility tie-up

TOKYO -- Netflix has enlisted the help of an unlikely partner in its push to solidify its status as the top streaming service in Japan: local utilities.

Since its Japan launch in 2015, Netflix has quickly become a staple among the young urban crowd largely thanks to the popularity of its original content. But with broadcast TV still reigning supreme outside big cities like Tokyo, the tech giant is working on attracting new subscribers who otherwise may have never signed up.

As part of its efforts, Netflix on Friday announced that it will offer a subscription and electricity service bundle starting November in partnership with Tohoku EPCO Frontier, a unit of regional utility Tohoku Electric Power. Those who sign up for the bundle stand to save up to 9,300 yen ($85) a year.

Roughly 4.2 million households across six prefectures will qualify for the discounted package. Netflix has bundled its subscription with mobile plans in the past, but this is its first time partnering with a company outside the telecommunications sector in Japan.

Streaming services available on smartphones, like Netflix, are especially popular among younger viewers, many of whom do not own TVs. Netflix became Japan's top streamer in 2019 with a 13.8% share. It gained almost 6 points to 19.5% in 2020 with more people staying home from the pandemic, according to Tokyo-based research company Gem Partners.

But they have not gained as much traction outside of Japan's biggest cities. Usership of the Netflix app came to 3.4% in Japan's northeastern Tohoku region in July, according to Tokyo-based market researcher Macromill -- lower than the 4.2% in the Kanto region, of which Tokyo is part.

A screenshot from the second season of "The Naked Director," which will be released worldwide on Netflix on Aug. 21. (Photo courtesy of Netflix)

The Tohoku audience instead appears to spend more time watching TV than those in Tokyo. Smart TV owners in Akita Prefecture on average spent 361 minutes watching TV on Aug. 10, 72 more minutes than in Tokyo and more than in any other prefecture as well, according to data compiled by research company Intage. Other prefectures in Tohoku also ranked in the top 10.

"We want to expand our customer base beyond young viewers in greater Tokyo," a Netflix source said.

Netflix's growth during the pandemic has largely been driven by subscribers who proactively sign up for its services. But the platform is now ramping up efforts to attract a wider audience across the world, and also partnered with a utility in Spain in July.

"We want to reach deep and wide into local communities by working with partners that are a major force locally," said Masato Shimoi, a business development executive at Netflix. The company plans to partner with more utility companies beyond the Tohoku region to expand its customer base in Japan.

In addition to global players like Netflix and Amazon.com, broadcasters, concerned by younger viewers' lack of interest in live TV, are also joining the fray. Public broadcaster NHK launched a streaming service in April 2020, which received a major boost from the Tokyo Olympics this summer.

"Competition for viewing time is only going to accelerate between streaming services, including those operated by TV stations," said Koichi Yomoda, who heads the Visual Media Research Institute.