As Netflix witnessed a slow down in its growth and increased streaming competition in India, the US, and other major parts of the world, it is looking to invigorate its market share.
This week, Netflix India dropped the price of its basic plan by 60%, from about 499 INR to 199 INR a month. It has also reduced its higher-quality plans by the same amounts (1).
However, the price change we found most notable was its mobile phone, which targets smartphone and tablet users in India. It has now come down to 149 INR from 199 INR that Netflix India introduced in 2019 (2).
Moreover, Netflix has noted that it will automatically upgrade members to the next tier up from their current plan considering the updated prices. In other words, if you live in India and have paid for a Basic plan, you will be promoted to the Standard plan for free. Members will also be able to switch between plans with prices going into effect from the next billing cycle.
Netflix’s focus on the Indian mobile users is in line with recent findings from App Annie, a mobile analytics firm that Indian consumers spend as much as five hours a day on their Android phones (3). It is worth noting that Android phones account for over 95% of India’s smartphone user base (4). Indians downloaded over 4.8 billion games in the first half of 2021 alone, surpassing all Android gamers worldwide.
The steep discount makes India the third-cheapest country for available Netflix subscriptions after Pakistan, where its mobile plan costs about 250 Rupees, and Kenya, where Android users can access Netflix for free.
Netflix is Witnessing a Slow Down in its Subscriber Numbers
Apart from India and Pakistan, the next five cheapest subscription plans of Netflix are in Africa and Southeast Asia. These changes come about a year after the streaming giant increased its prices in the US and UK (5, 6), and only after a month did it hike prices in some European countries, including Belgium and Netherlands (7, 8).
It seems clear that Netflix has lowered its prices in India because it is looking for growth amid the increased competition in the OTT streaming services.
Even though Netflix has beaten its subscriber growth estimates for Q3 (9), growth is not as robust as previous years (10). The reason behind this includes increased competition, and however, it also indicates market saturation in Netflix’s key markets in the west.
While other streaming services like Apple+, Disney+, and even Amazon Prime Video are still increasing their original streaming content libraries, Netflix has a very deep well of original content, in many cases region-specific, to promote its international growth, thanks to its earlier efforts.
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Netflix is Struggling to Hold the Indian Market
India is among the world’s most prominent entertainment markets. However, Netflix’s attempt to produce content that helps it gain more customers continues to struggle.
According to Media, a consultation firm, Netflix has about 4.4 million subscribers in India (11). However, the number falls far short of Reed Hastings, the CEO of Netflix, projection back in 2018 that the company will have about 100 million subscribers (12).
If we compare Netflix’s primary international competition, Netflix performs poorly against its competitors in India. A report from Media Partners Asia estimates that Disney+ Hotstar will have over 46 million subscribers by the end of 2021. Amazon Prime Video, which has over 18 million subscribers in the country, can reach about 22 million by the end of 2021 (13).
Their massive lead is not likely to evaporate soon, considering their efforts.
Apart from its 70+ original Indian movies and series, which is on par with Netflix India’s specific offerings, Amazon recently also launched miniTV (Suggested Reading: Prime Video is Trying to Be a Super OTT App; What Makes Amazon So Confident About This Strategy?).
The miniTV service offers access to short drama and comedy videos to drive more paid subscribers to its Prime Video service.
Besides entertainment content, one of Disney+ Hotstar not-so-secret success sauce is its license to stream IPL, Indian Premier League cricket matches on the platform. It also has a license to stream popular English Premier League soccer.
The subscriber disparity is the primary driving force behind Netflix’s attempt to win a huge chunk of India’s estimated 500 million smartphone users with its lowest mobile tier plan (14).
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However, Pricing Can Only Take Netflix So Far
Notably, Amazon recently increased its price from 999 INR to 1499 INR in India. However, besides streaming service, Amazon offers a lot more to its Prime members, including free one-day delivery on its ecommerce platform, Amazon Music, and several other benefits. Whereas, Hotstar offers its mobile subscription plan at 499 INR a year, which is cheaper than Netflix.
It is an entirely different market for Netflix, where it can’t raise prices if it wants to compete.
At the same time, even though Netflix shows such as She, Sacred Games, Delhi Crimes, and Ghoul won some attention among Indian viewers, originals from Amazon Prime Video like Mirzapur, The Family, and even Disney+ Hotstar continue to dominate the domestic popularity charts.
“We are slashing subscription prices so that more people in India can enjoy our expanding slate of films and shows from India,” stated Netflix in an email sent by Quartz while refusing to discuss its business strategy (15).
“We are have only started in India. It is easy to look at things and believe that we can do it easily. However, it is tough. While we have found out that while you can be as good as in one nation, it tells you nothing about the next one. There is a trial and error phase that we have been deep in right now,” states Ted Sarandos, co-CEO of Netflix, in an interview about the company’s strategy for India a few months back (16).
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Why is India Important for Netflix?
“India is a very important market since Indians are entertainment lovers, and for Netflix, the idea is to add the maximum value via content and pricing. As a brand and a service, the company doesn’t want to be recognized as a premium brand. Instead, it wants to be a brand that offers premium storytelling. Netflix wants to be a value brand for people, the choice platform for storytelling,” stated Monika Shergill, Vice President, Content Netflix to BusinessLine (17).
According to Karan Taurani, Senior Vice President from Elara Capital (18), most of Netflix’s audience is from the markets in the developed world. India offers a major growth opportunity for Netflix, especially when the market is saturated in the west.
“India is a big market opportunity for Netflix with ample penetration room in Tier 2 and 3 cities, combined with increased smartphone users and lower data prices. India is a market that will help Netflix increase its subscribers’ volume in the long term,” said Taurani.
Not even with recent price cuts, the streaming giant’s top executives have always remained bullish about India being a tremendous opportunity.
Earlier, Netflix had announced its plan to release over 41 new original productions in India alone this year.
“Like all great opportunities, our journey is long in India. It is a challenge, but we think it is worth it. That’s why we are investing early and attempting to stay ahead of it. I believe we will see the desired results that we have seen in other places worldwide as we keep on learning more,” stated Sarandos (19).
Hence, despite India being low ARPU Average revenue per user market, it has pushed the company for more pricing experiments.
Previously, Gregory Peters, COO and CPO of Netflix, had stated that the company is still learning about the right pricing model for India (20).
The Challenges Ahead
Even though India accounts for a mere 1% of Netflix’s revenues today, it can be one of its earmarked markets in the future. However, if Netflix has many challenges ahead besides the steep competition in the market to overcome to keep adding subscribers at a fleeting pace.
As discussed above, India is important for streaming companies not today but for tomorrow, and it offers a scope of opportunities for Netflix if priced right.
While Netflix has not released data on Indian subscribers, there are many insights from its Asia-Pacific numbers.
While Asia-Pacific is the smallest piece, bringing about 2.4 billion USD of its over 24.8 billion USD in 2020, it was increased by 61% – fastest among its key four regions. The share of the Asia-Pacific region in Netflix’s revenue has also increased from 6% in 2018 to 10% last year.
The region also made 13% of Netflix’s paid subscribers in 2020. As of now, 25% of Netflix’s net subscribers are from Asia-Pacific.
However, Netflix must overcome three key challenges to sustain growth in India.
- Subscribers Expansion Challenge, Disney+ Hotstar, and Amazon Prime Video continue to be market leaders.
- Price Challenge, India is a price-sensitive market.
- Investment Challenge, Netflix has to hold its prices and continuously invest in content to keep its subscribers interested. Netflix is playing a never-ending cycle in India.
The Way Forward
The success of Disney and Amazon in India relative to Netflix indicates the potential of subscriber growth in the massive country. After disappointing analysts and investors with lower subscriber growth, Netflix continues to look for ways to boost its subscriber count.
New pricing can bring new subscribers to Netflix, and since existing members are upgraded to the next service tier, it will help the streaming giant improve its retention rate.
Nonetheless, India presents a long turn opportunity for Netflix and any streaming company. The focus of any OTT platform for now in the Indian market is to keep its subscriber base as huge as possible.
And as for a big company like Netflix, it will generate positive cash flow in general. Its operations in the developed market can subsidize that growth in developing areas. In the long run, investments in India can give positive results with the potential for massive scale and improvements in the pricing model.