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From shampoo sachets at Rs 1 in the 1980s to pocket-friendly sachets of practically every consumable over the years, to the more modern cryptocurrency investments starting at just Rs 100, bite-sized products and services have powerful spend value in this country with relatively low per capita income. So, when global streaming giant Netflix introduced a bite-sized plan in July 2019—a mobile-only plan for Rs 199 a month — three years into its India entry, experts and consumers alike nodded their heads in delighted approval.
“The reception [to the Rs 199 plan] was amazing,” says Abhishek Nag, Director, Business Development, Netflix India, over a Zoom call, his casual, maroon round-neck tee reflecting the informality of the company’s work ethos. Nag points out that this subscription-plan-tied-to-a-device was a global first, compared to its usual plans based on streaming quality and the number of concurrent streams. The mobile-only plan was subsequently rolled out in countries such as Thailand, the Philippines, Malaysia and Indonesia. Recently, the plan was rolled out to 78 new countries in Asia and Africa.
A large part of the credit for the bite-sized plan goes to the ubiquitous mobile phone. In its very first year, Netflix allowed content to be downloaded on mobile devices, akin to some of its rivals. “In India, we saw the preference for people to download content on the device, which is watched on the commute back home [from work], completely uninterrupted,” explains Nag. That led to long conversations with consumers, visiting their homes, trying to see how Netflix might be on the mobile, before the full-fledged launch of the Rs 199 plan.
The other part of the credit goes to competition and India’s market dynamics. When Netflix launched in India in early 2016, its basic subscription plan was priced at an astronomical Rs 500 a month (yes, that’s Rs 6,000 a year). By end-2016, rival Amazon Prime Video rolled out its service in India; it was available as part of the Amazon Prime subscription at a price of Rs 499 for a year. It also included free deliveries and other services. Competition aside, there was another challenge. A large chunk of the market was (and still is) driven by advertising-fuelled free viewing, which makes it difficult for a subscription-based product, premium or otherwise, to be mass-adopted (today more than 300 million subscribers — duplicated — watch video content free of cost). Faced with these twin challenges, the Rs 199 plan was just what Netflix needed to inject a dose of dash to its India business.
But Netflix’s bite-sized plan was more than just any other OTT subscription plan. It afforded the fence-sitting, wallet-conscious consumer the opportunity to jump on to the Netflix bandwagon, and armed her with flaunt value (the ability to boast “I have a Netflix subscription”), an oft-underestimated sales lever for high-premium products or services. Has it succeeded? The company declined to share numbers, so we looked around for proxies. According to data from the Registrar of Companies (RoC), Netflix India nearly doubled its topline in the year the plan was launched (FY2019-20) to Rs 923.7 crore from Rs 470.5 crore in the previous fiscal; net profit also climbed to Rs 8.92 crore from Rs 5.16 crore in the same period. In terms of subscribers, The Ormax OTT Audience Report 2021 estimates Netflix has 5.4 million subscribers in India’s growing subscription video over demand (SVOD) market today; that’s a big jump from an estimated 1.5 million subscribers in 2018. A rival OTT player who requested anonymity says the mobile plan accounts for close to half the subscribers that Netflix has today.
Despite its impressive performance, Netflix — which posted a revenue of $25 billion globally for FY20 — has a tall challenge ahead to grow further. The 5.4-million subscriber count places it at No. 4 in this segment of around 96 million subscribers (taken as the number of paid users multiplied by the number of OTT platforms for which they cut a cheque; unique subscribers would be around 40 million). The challenge is tall because market leader Disney+ Hotstar has an estimated 34.5 million subscribers, while Amazon Prime Video (19.7 million) and Zee5 (6.5 million) are also ahead of Netflix. To climb this pecking order, the company needs to go beyond the Rs 199 plan and scythe through its premium imagery to broaden its appeal to the mass consumer.
The success of Netflix and other OTT players marks a sea change in the business model to make money in a dominant free content marketplace. “For the first time, you have a new technology and a new platform with some very strong pulls,” says serial entrepreneur Ronnie Screwvala, a veteran in the space since the 1990s, and now Co-founder and Executive Chairman of edtech platform upGrad. “The OTT landscape has done what cable and broadcasting and DTH couldn’t do for 20-25 years — get the consumer to appreciate great and strong storytelling, and pay for it.”
In nearly 130 countries [including India, where the service was rolled out in 2016], we’ve come in like the global service, and then we’ve gradually scaled up our local efforts. So [in India] we are in the early stage of that journey
Vice President, Content, Netflix India
But company executives don’t agree. “We are not a premium service in India,” declares Nag emphatically. Monika Shergill, Vice President, Content, Netflix India, is more nuanced, calling it a premium ‘storytelling’ brand. “We are very focussed on bringing value to our consumers. The way we see it, this is a journey of improving that value,” she says.
So, the question is: what defines premium? For entertainment veteran Screwvala, the word premium usually means “the highest subscription [cost] versus anybody else. But somewhere down the line, that equation of premium will come down to FOMO [fear of missing out]”, he says. “And from FOMO will come a desire for a very different nature. And that’s a corporate strategy for everyone.”
In terms of subscription cost, Netflix is definitely premium. Shailesh Kapoor, Founder and CEO of consulting firm Ormax India, points out that at Rs 199 per month, Netflix’s mobile plan is still a sizeable Rs 2,400 each year. “That is two-three times more expensive than the average OTT offerings,” he says. In addition, Netflix offers a basic plan for Rs 499; a standard plan for Rs 649 (which allows you to watch in Full HD on two devices in parallel); and a premium plan for Rs 799, which offers 4K+HDR video on four concurrent streams. The twist: all these are monthly plans. In contrast, Disney+ Hotstar offers a mobile plan at Rs 499 a year; a super plan (comparable to Netflix’s standard plan) at Rs 899 a year; and a 4K premium plan (comparable to Netflix’s premium plan) for Rs 1,499 a year. An Amazon Prime subscription can be had for Rs 129 a month or Rs 999 a year (which includes Prime Video, free deliveries and other services). Amazon also offers a mobile-only Prime Video plan to Airtel customers starting at Rs 89 for 28 days.
Netflix needs a breakout Indian show to make a mark [in this crowded market]
Founder & CEO, Ormax Media
The other question is: how does the Indian consumer relate to Netflix? The market is packed, with Disney+ Hotstar and Amazon Prime Video leading the pack. And while both vie for the same set of eyeballs, they have different business models. Disney+ Hotstar, which is from the Star and Disney India stable, offers its bouquet of broadcast channels and live events — including the popular Indian Premier League (IPL) cricket tournament — along with content from Disney. Amazon Prime Video, in contrast, is part of a bouquet of services from Amazon. Then there are SonyLIV, Zee5 and Voot, followed by Sun NXT and a host of smaller players. YouTube, a service that is driven by advertising, also offers a premium prepaid version at Rs 139 a month or Rs 399 for three months. With a base of 1.2 million paying subscribers, it is still a feisty player. And even Reed Hastings, Netflix’s billionaire Founder and Co-CEO, has acknowledged that YouTube is indeed its biggest rival.
Founder and Co-CEO
The subscription model is not one that all players are willing to go for. Take the case of MX Player where advertising is the big story. “There is a huge market for digital advertising that is untapped. In China, 70 per cent of total advertising comes from digital. In that sense, there is a lot we can do in India [broad estimates suggest we are at 18-20 per cent in India],” says Karan Bedi, CEO, MX Media. His company has taken baby steps on subscription, though Bedi says it is still iterative in terms of approach. “We are at the testing stage only and may do things like going ad-free for a few shows or early access. Our research indicates a small proportion will take the subscription route. In that sense, the thrust will continue to be on advertising where there is a huge opportunity.”
Ormax says Netflix needs that “breakout Indian show” to make a big mark. “In the case of Amazon, it would be The Family Man and for Hotstar, there is always the IPL. Netflix is still known for Money Heist and some international shows like House of Cards. A vast majority of the Indian audience will say Sacred Games but they need something more recent in the Indian context.” Questionnaires sent to Star and Disney India, Amazon Prime Video and Network18 (the owners of Voot) remained unanswered.
There is a huge market for digital advertising that is untapped. In China, 70% of total advertising comes from digital. In that sense, there is a lot we can do in India
CEO, MX Media
Shergill, however, seems unfazed. She says that these are still early days in India’s streaming journey, and at this stage, competition is a “very good thing” as all services are in ramp-up mode, and each with a different model. “What Netflix has uniquely is a pure-play, global content service, with the width, depth and scale that only Netflix has. And what we are here to do is to actually make Netflix India the way the global Netflix is,” she says. “So, in that journey, there will be competition. There is more demand currently [and] less supply, because it is the same creative pool. But at the end of the day, the competition will increase the talent pool, will force all of us to find newer voices, to have more ways of nurturing creators and projects, and bringing the best entertainment on to our individual services.” Also, considering that unlike cable and DTH, streaming has no distribution mechanism, competition is healthy — “because it pushes us to do one-to-one storytelling, co-viewing storytelling, format-based, mood-based, so long as the cohorts are large enough, they are actually consuming that. It allows you to experiment”.
Okay, so, competition is good, competition and Netflix will grow together, they will also grow the paid subscriptions market. But that still leaves open the question of how Netflix will grow. Netflix believes that it can achieve growth through strong focus on original, local content. Shergill explains that this strategy defers to a global template followed by the company. For the first three years, Netflix was in India as a global service. And then it formed a local content team. “That’s how we scale in any country,” says Shergill. “In nearly 130 countries [including India, where the service was rolled out in 2016], we’ve come in like the global service, and then we’ve gradually scaled up our local efforts. So [in India] we are in the early stage of that journey.” It is a point explained in greater detail by Sunil Gupta, Edward W. Carter Professor of Business Administration, Harvard Business School. According to him, Netflix adapts its pricing model to suit the local macroeconomic and competitive landscape. “The goal in each market is initially to gain customers [leveraging international content] and as this customer base grows, Netflix benefits from economies of scale for its digital content — marginal cost of streaming digital content to another customer is close to zero,” he points out.
In the past few years, Netflix has invested Rs 3,000 crore on content in India. In March 2021, it announced a slate of 41 titles; since then, it has revealed more titles, including Monica, O My Darling; Plan A Plan B; and Ankahi Kahaniya. Itis also collaborating with film-maker Sanjay Leela Bhansali for Heeramandi, a web series. “Original content is the heart and soul of Netflix, because globally, everywhere we stand for that,” says Shergill. However, she is quick to add that Netflix is ready to acquire the best kind of content out there, whether they are films, series, or documentaries.
Netflix has worked with Karan Johar’s Dharmatic Entertainment and Shah Rukh Khan’s Red Chillies Entertainment, and recently announced a multi-year partnership with Ritesh Sidhwani and Farhan Akhtar’s Excel Entertainment, which will produce a variety of stories under its banner Excel Media & Entertainment for the OTT platform. It kicks off with two projects tentatively titled Dabba Cartel and Queen of the Hill. A few years ago, it made a strategic foray into markets outside Hindi such as the south and met with success. Titles such as Navarasa, Jagame Thandhiram, Maniyarayile Ashokan, Miss India and Ala Vaikunthapurramuloo worked not just in India but also made it to the top 10 in many other countries. Today Netflix has content in all four south Indian languages, apart from Marathi, Punjabi, Bengali and Gujarati, among others; it has worked with film-makers such as Mani Ratnam, Vikramaditya Motwane, Ashwiny Iyer Tiwari, and Abhishek Chaubey, among others. Screwvala says that for Lust Stories, which he produced, he told Netflix that he wanted to make the film in Hindi, Tamil and Telugu, and that too with big-ticket directors helming 30-minute segments. And Netflix had the “vision” to accept it. “So that openness, that ability to take those breaks, and to actually think one year, two years ahead, is really what struck me,” he says.
The OTT landscape has done what cable and broadcasting and DTH couldn’t do for 20-25 years — get the consumer to appreciate great and strong storytelling, and pay for it
Co-founder and Executive Chairman, upGrad
In local content, Netflix is up against regional OTT players but Shergill maintains that these folks cater “to very, very specific tastes”. To her mind, larger services manage to cater to a wider audience base for those languages. But Netflix faces perhaps its stiffest local content challenge from large television broadcasters who own OTT platforms, because these entities already have the infrastructure and knowhow to create local content on a large scale, and bringing this expertise into OTT is perfectly logical. For example, Star and Disney India creates 200 hours of fresh content each week; the average for the others is 70-80 hours. “Of course, that is an advantage for the broadcaster since that means a greater choice is made available,” says an OTT executive at a large broadcasting network, who requested anonymity. The big difference is the convenience factor that OTT offers or just that it can be watched when you want to. “It comes with flexibility; OTT also lends itself to more intensity and better storytelling. People will pay for good content but that also means expectations need to be met.” For example, SonyLIV airs popular sports events (such as the Olympics) and cricket (such as the India vs England series), which are big draws. And besides content from its broadcast bouquet, it has found success with original shows such as Scam 1992: The Harshad Mehta Story, Maharani and JL50. SonyLIV charges Rs 999 for a yearly subscription. Here, it is critical to understand the difference between each of the mediums fighting for a share of the eyeballs. “Television viewing is a habit, while movies are all about experience. OTT is a pure content experience,” says the OTT executive quoted earlier.
A big draw in India is sports (more specifically, cricket) since it is not just popular amongst the masses but also gets past the language barrier. Both Disney+ Hotstar and Sony have a large presence here with the former banking on the IPL to bring in the bucks. The executive speaks of how handheld devices opened up the market and saw a surge in sports viewership. “Yes, it did reduce the dependence on originals but one cannot have sports exclusively on OTT. By definition, it can be viewed in many ways including television. Originals are exclusive to OTT, but [making them] is also a time-consuming exercise.”
Despite the seeming disadvantages, Netflix remains the go-to OTT platform from both production and viewing points of view. And it’s not by fluke. According to Screwvala, Netflix set the benchmark for storytelling in its first two years in India. “Then the talent started watching. Because the talent started watching it, they started emulating it.” And that led to a rise in production quality. Not surprisingly, Netflix is today the platform of choice for creative talent, says Screwvala: “If you ask them as a first port of call where they would ideally like to see themselves being watched, it is on Netflix. That doesn’t come easily.”
“Streaming services like Netflix are pushing filmmaking towards a higher quality of storytelling and enabling us to compete with the finest film-makers across the world in terms of quality and storytelling, which is fuelling our desire to do even better work,” says veteran film-maker Mani Ratnam, who co-produced the anthology Navarasa for the platform. “We were inspired by the amount of work they were ready to put in, the number of people who worked with us throughout, their attention to detail and focus on quality and, most importantly, how respectful they were of the creators who came on board, and gave them space and their complete trust to produce their work.”
Services like Netflix are pushing filmmaking towards a higher quality of storytelling
That’s high praise indeed from the high priest of filmmaking. Another factor is Netflix’s ability and agility in decision-making, says Screwvala. “And being able to spot what you could do with a piece of content and how it can travel around the world.” He explains that the platform has a deep understanding of the customer. “So, because you have such a deep understanding of the customer, it means you pay a lot of respect for research. But it also helps your decision-making process and really fine-tunes your gut. So, I would say this is one entire combination of a circle of creativity that comes there.”
One of the things Netflix insists on is an immersive user experience. And for that, it has invested heavily in technology. “When it comes to technology around streaming video and audio, I think we’ve been fortunate to be at the forefront of a lot of that innovation from the very beginning... whether it’s the introduction of HDR, Dolby Atmos across most of the library, 4K content... all of those. I think we have an extremely talented technology team,” says Nag. Adds Shergill: “From a tech point of view, we feel that streaming is actually the confluence of great content and great technology. It’s the amalgamation of these two things that brings to you in your comfort with your convenience, your choicest stories, so that you can have your own Netflix.”
All new original shows on Netflix are now in 4K HDR. It is just as well, since rivals such as Disney+ Hotstar and Amazon Prime video have also ramped up content in similar formats.
The moot point is to what extent Netflix (or for that matter any OTT player) can cause disruption in the Indian market. That is a bit of a tall order and the numbers spell it out. Of India’s total population of an estimated 1.3 billion, close to 600 million people enjoy free content courtesy the television channels who charge nothing for subscription. Another 400-500 million viewers are subscribed to the cable and satellite networks at nominal fees of around Rs 250 each month. The balance subscribe to OTT platforms (both paid and free).
By comparison, it was a much easier path to success for Netflix in the US. Jagdish Sheth, Charles H. Kellstadt Professor of Business at Emory University, who has tracked the company, thinks video on demand being a more mature platform did not make it difficult to think of a video streaming service. It was after the saturation in the US that the story turned to other markets. Starting with Canada, Netflix moved into Europe followed by Asia. That footprint now is spread over 190 countries and 209 million paid subscribers.
According to Sheth, while price is a factor in India, that factor exists across product categories; he mentions cell phones as one instance. “It is more important for Netflix to get into the regional markets much as how cable television has gone about it. The even bigger issue is that of bandwidth; the market will grow as more 4G is deployed and the migration to 5G happens,” he maintains. That is not to forget how the market composition might eventually look. “I am quite convinced that Reliance will make a play in streaming services. The only way Netflix can make its services more affordable is to get advertising revenues,” adds Sheth. If Netflix takes that route, it will be a marked departure from its traditional subscription-driven model.
Nag says India is a bellwether for what you can expect in a lot of other emerging markets in South-East Asia and Africa, and is turning out to be a ready testing ground for the OTT giant. That said, Netflix also does things similar to how it has in other markets. Bundling the offering with mobile operators is one example. In faxct, Nag says it is the case across all geographies for Netflix. “We do it with Comcast and T-Mobile in the US or KDDI in Japan. People across the world know a lot about us and it is really all about giving people more choice to access our service.”
In India, Netflix is bundled with Reliance Jio’s select tariff plans. Subscribers can also pay for their subscription on Vi and Airtel, with which Netflix has partnered. Though no one will speak on the nature of revenue sharing, telecom officials point out that only a small share goes back to the OTT platform. “There are a lot of riders in each deal, such as how many times a subscriber has availed the service or the number of hours spent on that OTT platform. This can never be more than 7-8 per cent of any platform’s revenue,” says a telecom executive familiar with the process.
Indian members are a bellwether for what you can expect in a lot of other emerging markets in South-East Asia and Africa
Director, Business Development, Netflix India
Netflix’s worldwide footprint also allows it to exploit original local content better. “With its global reach, Netflix is able to leverage its local content across geographical boundaries. This allows it to experiment with new content and new talent. Plus, technology allows it to create subtitles or dub these series for global audiences at a relatively low cost,” says Gupta of Harvard Business School. On the specific issue of bundling, he says it gives Netflix access to a large pool of potential customers without spending too much on marketing. “Although many mobile operators initially resisted such deals with Netflix, increasingly they are realising that Netflix gives them a unique competitive advantage to retain their mobile customers.”
As Netflix enters its sixth year of the India story, it is fair to say progress has been made in a market where they came with only the brand name. To face up to large broadcasters with money on a terrain like India is never easy. The next phase will be about how it will crack the market beyond what was its ‘rightful’ base of premium subscribers. That is possible but equally challenging as well. Holding on to a limited base is not why Netflix is in India. For a country known for its rich storytelling heritage, the basket of content is literally unlimited. How Netflix gets it right on the equation between great creative work and commercial feasibility looks like a great story.
Clearly, we are moving to Act I, Scene II. Let the action begin.
Story: Krishna Gopalan, Abhik Sen
Producer: Vivek Dubey
Creative Producer: Raj Verma, Anirban Ghosh
Videos: Rashi Bisaria, Vivek Sheel
UI developer: Ravi Kumar, Mohd. Naeem Khan