Four years ago, Netflix (NFLX) – Get Netflix, Inc. Report Chief Executive Reed Hastings said the company’s next 100 million subscribers would come from India. It hasn’t worked out that way.
Netflix and rival streaming giant Disney have both struggled to gain traction in the world’s second most populous country.
“The great news is in every single other major market, we’ve got the flywheel spinning. The thing that frustrates us is why haven’t we been as successful in India. But we’re definitely leaning in there,” said Hastings on a recent earnings call.
One key to the stumbles has been pricing. Indians love entertainment. But they’ve never really had to pay nearly as much as a Netflix subscription plan that costs roughly $8 a month, at its cheapest.
Last month, Hastings pointed this out, during the streaming giant’s earnings call for the fourth quarter.
“What’s unique about India is cable is about $3 per month per household. So, radically different pricing than the rest of the world, which does impact consumer expectations,” said Hastings.
A linear cable TV or pay TV subscription plan in India which typically includes a bundle of over 100 television channels costs $1.73 a month on average.
It’s not surprising then that Netflix slashed its prices in India very aggressively in December. Its most basic plan in India now costs $2.65 a month while its high-end premium offering costs a little over $8. The entertainment giant’s mobile only viewing plan starts at even lower entry price point that costs $2 a month.
“We felt it was the right time to decrease our prices there, to increase accessibility to all of that sort of — those incremental value or features that we’ve been trying to deliver to the market to more Indian consumers,” said Netflix Chief Operating Officer and Chief Product Officer Greg Peters, last month, after Netflix reported fourth quarter earnings.
“And again, we’re doing this through the lens of what’s the long-term sort of revenue maximization… And so in this case, we’re — basically anticipated that while we decrease average revenue per member, as a result of the price decreases, we’re going to make it up in more subscriber adds,” Peters added.
Netflix did say that early data since these new pricing plans were announced supports its theory of revenue maximization through more subscribers.
Netflix posted stronger-than-expected fourth quarter earnings in January, but forecast soft subscriber growth for the first three months of the year amid what it called “Covid overhang” in key overseas markets.
The price cut also comes at a time when Netflix has not managed to crack the Indian user market, 6 years since it first launched operations there. Its total paid subscriber base in the South Asian nation stands at an abysmal 5.5 million, according to third party data shared by research firm Media Partners Asia.
Netflix does not break out subscribers numbers by country.
The figure pales even in comparison to other international rivals like Disney (DIS) – Get Walt Disney Company Report and Amazon (AMZN) – Get Amazon.com, Inc. Report. Amazon’s Prime Video service has 16 million users and Disney+ Hotstar, Disney’s streaming service has 50 million subscribers in India, respectively.
India Is Fast-Growing Streaming Market
The paid subscriber market in India is set to grow 51% to hit 90-100 million users this year, driven by cheaper data plans and increasing Internet adoption, as reported by Indian news website Livemint.
For streaming giants like Netflix and Disney success in India has become critical, especially since they’ve been shut out of China
“I think we’re quite bullish that India isn’t fundamentally different in some way that we can’t figure out how to tailor our service offering to be attractive to Indian consumers who love entertainment,” added Peters.
When Netflix started its business in the U.S., most of their early programming was liked on the coast, basically in California and New York. Then it just programmed to the middle. That’s what the Los Gatos company has hoped to do in India.
Disney + Hotstar India Journey
Media giant Disney (DIS) – Get Walt Disney Company Report which started its streaming journey with Hotstar (now Disney+ Hotstar) in 2015, is eyeing 230 to 250 million users in India by the end of its 2024 fiscal year.
The service has been more successful in India thanks to its cricket broadcast rights. The game, originally from England, has near religious followings in India.
Disney Chief Executive Bob Chapek said recently that the company is, certainly going to try to extend its digital streaming rights for the popular cricket tournament, the Indian Premier League, which has been credited for the sharp rise in the platform’s paid user base.
“But we’re very confident that even if we were not to go ahead and win that auction that we would still be able to achieve our 230 million to 260 million,” he added.
Overall, Disney+ Hotstar added 2.6 million paid subscribers in the latest quarter, which also includes users from Malaysia, Singapore, Japan, South Korea, Hong Kong, Taiwan and Thailand, where the service was launched last year.
Source: https://www.thestreet.com/investing/netflix-only-costs-2-65-a-month-if-you-live-in-this-country?puc=yahoo&cm_ven=YAHOO&yptr=yahoo