Why India content becomes key for Netflix before AVOD roll-out

Netflix has picked tech giant Microsoft to roll out its ad-supported version globally, but it has to get its regional content strategy right to boost subscriber growth and profits even though the advertising route in the Advertising Video On Demand (AVOD)-dominant Indian OTT market, experts have said.

In its last earnings call in April, the California-headquartered SVOD streaming giant said it would look into an ad-supported version to boost revenue growth wherein a consumer will have the choice of paying a lower price if they’re ad-tolerant. It may take Netflix a year or two to figure it out, Founder and Co-CEO Reed Hastings had said.

In India, the streaming major has been struggling to add subscribers. It has been missing the content mark with its western flavoured library and premium pricing, effectively catering only to a premium niche in the country, which it has already amassed with its 5.4 million-strong subscriber base, experts have pointed out.

India, with its 350 million-odd digital content consumers, is a key a market today for any OTT player. But only 40-odd million of them are paying OTT subscribers, according to Ormax Media estimates. Elara Capital pegs that a thumping 63% of India’s $1.7 billion OTT market is accounted for by AVOD revenues.

But even to reach more viewers through the AVOD route in India, Netflix will have to cater to the regional audience, experts have said. “If Netflix has to get into AVOD, it has to expand its target audience and content offerings to other regions,” Karan Taurani, Senior Vice President and Research Analyst at Elara Capital, told Business Today earlier.

Naresh Gupta, Co-founder and Chief Strategy Officer of media communication company Bang In The Middle, had also told Business Today earlier that in its current form, there is low interest from the mainline brands to advertise on Netflix, and won’t feature high up even in the plans of the premium brands that may want to. “Netflix has the same problem that HBO and Star Movies had in the past. Its English-focussed library means that brands get a very small advertising opportunity, which they are happy to ignore.”

Since May, Netflix has been focussing more on populating its content library with digital premieres of theatrical releases across Hindi, Tamil, Telugu and Malayalam. Bhool Bhulaiya 2, Gangubai Kathiawadi, Jersey, Dasvi, ToolsiDas Junior, Radhe Shyam, RRR, Hey Sinamika, Don, Etharkum Thuninthavan and Kuthiraival, Ante Sundaranikki, Major, Virata Parvam and Dear Friend are among some of the releases. During this span, it has added four Netflix originals – the films Love Goals and Thar, Imtiaz Ali-directed series She and the animated film Mighty Little Bheem: I Love Taj Mahal.

Gupta added that Netflix has to act like an influencer and look at content integration and partnerships on social media rather than a pure ad-serve model to be successful. Consultancy agency Ormax Media Founder & CEO Shailesh Kapoor had told Business Today that there is a large AVOD audience within the OTT viewership—which binges on YouTube and MX Player—waiting to be tapped. “There are many people who have not taken their first subscription. That large base, over the next one to three years, will think about paying, and that base will continue to grow. The question is, will they pay for Netflix?”

Netflix lost 200,000 subscribers world over during January-March 2022 and expects to lose another 2 million subscribers in the April-June quarter. This comes after the management had earlier said it would add 2.5 million subscribers in the January-March quarter.