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Japan is a highly connected market with 49 million affluent households. You'd think that the combination of high-speed Internet access, plenty of disposable income, and a bemused addiction to Western culture would make Nippon a perfect target market for digital movie services from America. Netflix hasn't made the leap to Tokyo yet, and Amazon.com just opened up a digital movie store in Japan.
Game, set, and match -- right? Amazon gets the first-mover advantage, and Netflix might as well not bother attacking the Japanese market now.
Not so fast. I can think of at least three big reasons why Amazon's Japanese adventures don't throw any roadblocks in front of Netflix's Far Eastern ambitions:
Amazon is only serving up pay-per-view rentals and digital purchase options in Japan. This is a markedly different business model from the all-you-can-eat subscription service that Netflix sticks to and that Amazon's Prime subscription service offers. Apples, meet oranges.
Like I said, Amazon isn't bringing Prime to Japan at this time, and might in fact never get around to doing so. Amazon prefers the simpler licensing model and higher margins of selling or renting content one item at a time. Netflix goes for a long-term relationship with a larger addressable market instead.
A bit of competition never scared Netflix out of overseas market opportunities before. In particular, Amazon already had its LoveFilm subscription service in the U.K. before Netflix entered that market. So even if Amazon does bring Prime or LoveFilm to Japan, that's not exactly the end of Netflix's Japanese ambitions.
If anything, you should be surprised to see Amazon moving in with its plain-Jane rentals and purchases model. Apple already has its iTunes movie store running in Japan, alongside several local services with a similar model. It's not clear how Amazon plans to set itself apart from Apple, GyaO, or Tsutaya, so this service risks becoming just another commodity in a sea of equivalent options.
And Netflix does have Japanese ambitions. The company is already hiring Japanese translators with marketing experience, so you can expect a Netflix service in the Land of the Rising Sun before too long. I'd be shocked if we don't see Netflix crossing over to Japan and South Korea -- another hyperconnected Asian market with more than 20 million movie-hungry households and an existing relationship with Netflix -- in 2014. It's a logical next step for Netflix's international plans.
Netflix is coming to Japan, with or without competition from Amazon and Apple. This particular announcement shouldn't make any difference at all to Netflix's overseas plans.
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The article Did Amazon Just Beat Netflix to the Punch in Japan? originally appeared on Fool.com.Fool contributor Anders Bylund owns shares of Netflix. Check out Anders' bio and holdings or follow him on Twitter, LinkedIn, and Google+. The Motley Fool recommends and owns shares of Amazon.com, Apple, 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.
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