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Three reasons Netflix won’t hit 100M Indian subs anytime soon

Indian OTT video services by subscribers Dec 2017

Netflix thinks it can reach 100 million subscribers in the Indian market. With the way things are now, that won’t be happening anytime soon.

The 1.3 billion people in India are an appetizing prospect for any video service providers. Reed Hastings, Netflix CEO, is convinced his company stands to win big in the market. Speaking at The Economic Times Global Summit in New Delhi last week, Mr. Hastings was impressed with the growth in broadband in the country and thinks that bodes well for the growth of Netflix subscribers:

“The next 100 million is from India. We are at 120 million across the world.”

With just 5 million subscribers today, that target seems a tall order. Here are three reasons Netflix won’t get anywhere near 100 million Indian customers anytime soon.

Reason #1: Mainstream media is cheaper

Netflix costs Rs 500-800 a month ($7.7 to $12.35) in India. The typical pay TV subscription costs just $5 a month. Mr. Hastings defends his pricing in the market by saying that pay TV is subsidized by TV advertising. Netflix is worth more, he says, because it is ad-free. He thinks the movies are a better comparison:

“It’s about what a movie ticket would cost. We would like consumers to compare it with that <movie ticket> than what they pay for cable TV.”

Even compared to movie tickets Netflix is still expensive. The average movie ticket costs between Rs 150 and 250 ($2.30-$3.90) and in some local markets it is even cheaper than that. For example, in Chennai, it is between Rs 50 and 160 ($0.8-$2.50).

Reason #2 Local online competition is cheaper

Online video market leader Hotstar, owned by U.S.-based 21st Century Fox, was launched in 2015, just before Netflix launched its global player. The service costs Rs 199 a month ($3) and is available discounted at Rs 969 ($15.40) for a year. The company has already garnered 75 million subscribers.

Cost of top 5 Indian OTT video services Dec 2017

Amazon is also making a strong play in the Indian market. It has just finished a promotion that provided Prime membership, including access to Prime Video, for just Rs 499 ($7.50) for a year. The new price is Rs 999 ($15.60.) Prime Video already has 11 million subscribers.

Netflix costs twice as much as competitors, and this has hurt the company deeply in the Indian market. The pricing makes it affordable to only the wealthiest of Indians. With just 5 million subscribers, it is the fifth largest online subscription video service.

Reason #3: Indian content catalog too weak

Hotstar’s parent, 21st Century Fox, has a portfolio of 58 TV channels in eight languages. It has tapped its extensive catalog of Indian shows and augmented it with hits from HBO including Game of Thrones and Westworld.

Voot, owned by Viacom 18, combines local shows like India’s Next Top Model with versions of top shows from MTV, Nick available in local languages like Hindi, Tamil, Bengali, Kannada, and others.

Meanwhile, Indian’s feel cheated by Netflix because 93% of titles available in the US are not available in India. Netflix is increasing production of Indian series, it will produce three this year, but this is far short of competitors.

Netflix faces other challenges in the market. For example, mobile broadband is the dominant way Indians get online. That means the phone is the primary viewing screen, not the television where Netflix focuses. As well, the Indian market is many markets with unique languages and traditions. Netflix must address each of the major ethnic groups if it is to stand a chance of realizing its 100 million Indian subscriber target.

Why it matters

Netflix is anticipating big growth in the second most populous country in the world, India.

That won’t happen anytime soon.

The company is too expensive relative to old media and new online competition and is not producing enough local content.

Netflix struggles in India are emblematic of the company’s problems across the developing world.

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