New report explores Netflix’s growth challenges in the Nigerian market

By Joseph Ekeng
In the dynamic world of Nollywood, Nigeria’s flourishing film industry, the journey of Netflix towards dominance unfolds against a backdrop of triumphs, hurdles, and strategic intricacies. This deep dive explores the multifaceted challenges shaping Netflix’s presence in the heart of African cinema.
Without a doubt, Nollywood which is Africa’s largest movie hub by volume, has been a cinematic force, particularly in the Anglophone West African region. Recent years have seen Nigeria commanding a staggering 97% of box office revenue in this vibrant film ecosystem. In a testament to the global reach of Nollywood, “The Black Book,” a Nigerian film released in September, made history by becoming the most-watched African film on Netflix.
However, amidst these successes, the world’s leading streaming platform, Netflix, finds itself navigating a complex landscape, grappling with challenges to solidify its foothold in this culturally rich and diverse market.
According to Omdia, a London-based research firm, Nigeria’s contribution to Netflix’s African subscriber base stands at a modest 10.5%. South Africa, on the other hand, boasts a significant 73.3% of Netflix’s African subscribers. On a continental scale, Netflix’s growth trajectory appears somewhat restrained, with a reported 1.6 million subscriptions from Africa after six years in the market. Projections suggest a growth to 2.2 million subscribers in the next five years.
This discrepancy raises questions about Netflix’s approach to different African markets and the factors influencing its growth in the region.
Netflix formally entered Nigeria’s film industry in 2020, four years after marking its presence in Sub-Saharan Africa. A closer look reveals strategic nuances in the streaming giant’s approach. Netflix’s socio-economic impact report discloses a substantial investment of $175 million in sub-Saharan Africa between 2016 and 2022. A considerable 71% of this investment flowed into South Africa, eclipsing Nigeria’s share, which amounted to $23 million (13%).
Moreover, out of numerous productions, South Africa secured 16 Netflix originals compared to Nigeria’s three. This disparity in content creation and investment distribution unveils Netflix’s deliberate choice to spend more time and resources in South Africa than any other African country.
Several factors likely influenced Netflix’s decision to prioritize South Africa. Firstly, South Africa boasts the most profitable film industry on the continent. Notably, no Nigerian film has achieved a box office revenue of $2 million, while the highest-grossing African film, “The Gods Must Be Crazy,” garnered over $200 million.
Additionally, the landscape of internet adoption played a pivotal role. South Africa led in mobile broadband subscriptions at the end of 2015, with 28% of South Africans subscribed, according to GSMA. In comparison, only 12% of Nigerians were internet adopters. While internet adoption has improved in Nigeria over the years, South Africa’s initial advantage may have influenced Netflix’s strategic decision-making.
Today, internet adoption has witnessed significant improvements in most Sub-Saharan markets, including Nigeria. However, the Subscription Video on Demand (SVOD) market in Nigeria remains notably smaller than that of South Africa.
Wealth distribution emerges as a key differentiator, with South Africa showcasing better wealth distribution than Nigeria. According to McKinsey, South Africa is home to 40% of all billion-dollar revenue companies in Sub-Saharan Africa and boasts the highest number of millionaires on the continent. This economic disparity contributes to the varied dynamics of SVOD market activity between the two nations.
A noteworthy shift in the SVOD landscape is the rise of local platforms. Showmax, a South African streaming platform, has overtaken Netflix in market share, highlighting the prominence of platforms with a localized approach. Conversely, Nigeria’s most famous indigenous SVOD platform, Iroko TV, faced challenges in the local market, prompting a significant pivot.
The economic landscape of Nigeria introduces another layer of complexity for streaming platforms. The pool of disposable income in Nigeria is constrained, with 133 million multidimensional poor people, representing more than 66% of the entire population. Various reports indicate that Nigerian residents allocate between 59% to 97% of their earnings towards food, leaving limited resources for discretionary spending on entertainment services.
Netflix also grapples with Nigeria’s dollar scarcity, a two-edged concern. Receiving payments from Nigerian subscribers via debit cards has posed challenges, with several banks imposing restrictions, cutting down dollar payments to as low as $20 monthly. The volatility in Nigeria’s exchange rates further complicates matters, making it difficult for international companies like Netflix to project earnings accurately.
In response to these challenges, Netflix has undergone strategic adjustments. Recognizing the unique adoption cycles and economic nuances of African markets, Netflix abandoned its freemium model in Kenya after two years. Instead, the company embraced a new approach by reducing prices in multiple African markets by 37%.
This shift indicates a strategic pivot towards prioritizing a small but growing pool of paid subscribers over a large base of non-paying users. It underscores Netflix’s understanding that success in the African market demands a nuanced strategy tailored to the unique dynamics of the region, contrary to the hypergrowth pursuit often seen in more established markets.
As Netflix grapples with the intricate challenges in the Nigerian and broader African market, it becomes evident that commissioning titles alone will not secure a deep-rooted presence. The adoption cycles and economic realities of this diverse region require a patient, tailored approach.
The journey unfolds as Netflix plays the long game, recognizing that success in Nollywood and beyond demands a nuanced understanding of cultural nuances, economic landscapes, and evolving consumer behaviors. The intricacies of this narrative paint a rich tapestry, highlighting both the triumphs and complexities of Netflix’s venture into the vibrant world of African cinema. As the streaming giant adapts its strategy to the rhythm of African audiences, the story continues to evolve, promising an intriguing chapter in the ever-evolving narrative of Nollywood and global streaming platforms.


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