Netflix is in India for long haul, may triple subscribers to 4.1 million this year
BusinessToday.In July 19, 2019
Netflix, the world's leading internet entertainment service, is looking at India to drive growth in its membership figures in the third quarter. "We've been seeing nice steady increases in engagement with our Indian viewers that we think we can keep building on. Growth in that country is a marathon. So we're in it for the long haul," Netflix Chief Content Officer Theodore Sarandos said on an analyst call post the Q2 results on Wednesday.
India is the new battleground for streaming services courtesy its fast mushrooming smartphone user base. The fact that streaming service is effectively blocked in China, the most populous country, makes India all the more appealing to players in the business. A recent Ericsson Mobility Report estimated smartphone user base in India touching 1.1 billion by the year 2024. The projected figure for this year is around 500 million and data consumption on smartphones is already the world's highest. Another study by the Boston Consulting Group estimates that India's video-on-demand market will touch $5 billion by 2023 from $500 million last year. Significantly, it added that paying subscribers could go up to 50 million, while users of advertising-supported video-on-demand will reach 600 million.
Little wonder then that Netflix is betting big on India, especially after the missed forecast in terms of subscribers in the second quarter. It saw its paid membership increase by 2.7 million, which is not only 51 per cent lower than the year ago period but also far behind the forecast of 5 million. Nexflix is now gunning for global paid net adds of 7 million in Q3, of which 6.2 million will come from international markets especially India.
"Netflix is in a land grab to capture as many subscribers as possible, whatever the price," Michael Pachter, a managing director at Wedbush Securities Inc, told Bloomberg. The Los Gatos, California-based firm will probably almost triple subscribers in India this year to 4.1 million, within striking distance of Amazon Prime's 4.4 million, according to estimates by researcher IHS Markit. The growth rate, in fact, is faster than Amazon or Disney-owned Hotstar, two of Netflix's biggest competitors.
But pricing issues and the cut-throat competition for eyeballs may pose a speedbreaker for Netflix CEO Reed Hastings's goal of 100 million customers in India. Apart from global rivals, Netflix now also contends with broadcasters and Bollywood powerhouses allied with billionaire-backed wireless carriers, Airtel and Reliance Jio. Zee Entertainment Enterprises Ltd. and Balaji Telefilms Ltd. have been betting on bundling their content with mobile phone services
"Pricing is going to be the biggest challenge," Hanish Bhatia, senior analyst at Counterpoint, told Bloomberg, adding that Indian users long used to relying on torrent, have not accepted the idea of paying for content yet. Netflix has responded to competition in India by announcing a lower-priced mobile-only plan on Wednesday, which will cost half its typical subscription fee. Netflix currently offers three monthly plans in India, priced between Rs 500 and Rs 800.
"After several months of testing, we've decided to roll out a lower-priced mobile-screen plan in India to complement our existing plans. We believe this plan, which will launch in Q3, will be an effective way to introduce a larger number of people in India to Netflix and to further expand our business,"Netflix said in its latest letter to the shareholders. In a similar vein, Chief Product Officer Gregory K. Peters explained during the analyst call that a lower price offering would improve accessibility in "a market where the typical pay-TV package is under $5 (Rs 344)".
Netflix also plans to raise spending on local content faster in India than in any other market. On Wednesday it said five new originals are coming up, two of which are being produced by superstars Shah Rukh Khan and Anushka Sharma. "The one we're also really excited about later on this year is Baahubali, which is our first step into a really large-scale Indian original film," said Sarandos. The second season of "Sacred Games" is also set to release in August.
(Edited by Sushmita Choudhury Agarwal)