Here’s Why Netflix Is Looking For Translators
Netflix‘s (NASDAQ:NFLX) international segment accounts for nearly 45% of its valuation, according to our estimates. By 2023, we estimate that more than half of Netflix’s revenues will come from its international segment, and its international streaming contribution margin will nearly match its domestic contribution margin.
With the company’s valuation significantly dependent on the success of its international segment, Netflix is ensuring that customers are able to enjoy its premium content regardless of what language they speak. To that end, Netflix introduced HERMES, an online subtitling and translation test and indexing system which will allow it to tap into translator talent across the globe. The company provides subtitles in 20 languages currently, which is a significant jump from 3 languages supported five years ago. However, as it continues to expand globally, the need for translators is increasing as it looks to support customers in several new regions. As the company continues to grow rapidly in international markets, management says it is nearing a point at which English “won’t be the primary viewing experience on Netflix.” HERMES will allow the company to better vet candidates who can help in translation, ensuring that its content can be delivered in local languages without any translation issues.
Netflix is lagging behind some competitors in markets such as India due to a lack of local content. While players such as Amazon are working on regional shows, Netflix’s strategy is to appeal to a wider audience. The production of local shows is more expensive than translating an existing show into the local language, and Netflix is hoping that translating its popular original content to more languages can help it boost its international subscriber base.
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Success in international markets is crucial for Netflix’s valuation; our price estimate, which is below the current market price, is based on a forecast of steady growth in international subscribers as well as substantial margin expansion in the next five years. We expect strong adoption in Europe, Canada and expansion in Latin America, along with reduced marketing costs and higher operating leverage in the international segment, to help Netflix achieve this goal. With that in mind, a continued focus on content that can be viewed internationally is a smart revenue-generating strategy for Netflix in the long run.
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