“Frustrating”: Co-creator Reed Hastings says Netflix hasn’t done well in India in 2022
“Frustrating”: Co-creator Reed Hastings says Netflix hasn’t done well in India
With 2.58 million paying members gained in the Asia Pacific area in the fourth quarter of 2021, Netflix recorded its most substantial subscriber increases in more than a year, fueled by robust growth in India and Japan. Netflix is the world’s most extensive streaming entertainment company by subscribers.
To be sure, Asia is the company’s smallest region, trailing just North America, Latin America, and Europe in terms of market share. The 32.6 million users in the area make for 14.7 percent of the service’s total membership of 221.84 million members.
However, as Netflix, located in Los Gatos, California, increasingly relies on worldwide markets for growth, the region is becoming increasingly essential. With the help of triumphs in South Korea and Japan, Asia has emerged as one of the most critical regions for the service’s user additions during the past few quarters.
India has proven to be a difficult market to break into as the service attempts to establish a footing in the country amidst fierce competition.
On a conference call to announce the company’s profits on January 20, Netflix co-founder Reed Hastings said, “We’ve got the flywheel spinning in every single other key area.” “The thing that upsets us is that we haven’t had the same level of success in India. Nevertheless, we’re putting our all into it.”
A Reduction In Price
Netflix dropped its India pricing in December for the first time since its launch in 2016. The entry-level plan was the most significant reduction, now available for Rs 199 per month, down from Rs 499 per month earlier.
In recent times, the organization has made its offerings more appealing to people who might want to buy them, like launching a mobile-only plan and testing different pricing trials across the country.
“Cable is unique to India,” Hastings explained. Consumer expectations are affected by the cost of approximately $3 (Rs 223) per month per household, a drastically different pricing structure from the rest of the globe.
During its quarterly earnings conference call, Netflix Chief Operating Officer Greg Peters stated that it was the appropriate moment to lower costs in India. The company evaluated its efforts to extend its products.
‘We also wanted to do that throughout our entire product line of plans,’ Peters explained, “on the idea that some of those things, like as the ability to watch on TV with a basic plan, truly unlock more value in the service and hence generate greater loyalty and more attraction.” “While the price reductions will result in a decrease in ARM (average revenue per member), we will make up for it by increasing the number of subscribers (additions).”
“Some of these impacts, like retention, take a couple of months to get a very clean read on it,” says Peters, who emphasizes that the research is still in its early stages.
The Netflix Group’s CFO, Spencer Neumann, stated that every country has a different adoption curve. Even though everyone enjoys films, television, and video games, entertainment is still fundamentally a highly local experience around the globe.
Even though the company does not disclose a breakdown of its users by country, independent research and consulting firm Media Partners Asia anticipated that the service would have 5.5 million customers by the end of 2021.
Netflix claims to have a 29 percent share of subscription video on demand (SVoD) revenue in India while having only 5 percent of the country’s total streaming service customers. According to the MPA, India currently has over 102 million SVoD users, which will grow to 224 million by 2026.
A Sluggish Start
A total of 8.3 million new Netflix subscribers joined the service during the fourth quarter of what was otherwise a poor growth year for the firm. Net yearly member additions decreased to 18.2 million in 2021, a 50% decrease from the record-breaking 37 million members added in the previous year.
The company predicted a slow start to 2022, which expects to add 2.5 million subscribers in the first quarter of 2022. The company cited delays in key titles such as the second season of Bridgerton and the upcoming science-fiction film The Adam Project, both of which are expected to premiere in March.
While retention and engagement continue to be strong, acquisition growth has not returned to pre-Covid levels.
As the business said in an investor letter, “this could be attributable to a variety of circumstances, including the ongoing Covid overhang and macro-economic difficulties in some parts of the world, such as Latin America.”
Entry Into The Gaming World
Netflix is also ramping up its recent debut into the gaming world. In a statement, the company stated that it plans to extend its catalog of games in 2022 to include both casual and core gaming genres.
Peters stated that the company is open to licensing massive game IPs (intellectual properties) well-known to the public.
“I believe you will see some of it happen throughout the year,” he said.
“A big long-term multi-year potential,” says Peters, is being created within the corporation to support the creation of its video game studio.
Streaming behemoth Netflix purchased Night School Studio in September, a game developer known for the supernatural mystery visual adventure Oxenfree, to speed this process.
According to Peters, this will enable them to provide interactive experiences “that are related to the IP that we’re enthusiastic about, and that is scheduled to coincide with that.” This is the time when you’ll see a new level of unlocking in terms of the value we can provide to members.”
“We’re going to try a lot of new things and take a lot of risks.” Our long-term focus, on the other hand, is more on our capacity to create properties that are tied to the universes, characters, and stories that we’re developing in different areas and to magnify the value of those properties to fans of those tales,” he explained.
Netflix has released ten mobile games since the service’s introduction on Android and iOS in November. These games are Netflix-exclusives, albeit each one must be downloaded separately because they are so large. They are made available to Netflix subscribers on an ad-free basis, with no in-app purchases or any other additional fees required.
The reasons why Netflix hasn’t been able to break into the Indian streaming industry are as follows:
For US streaming behemoth Netflix, India has been a difficult market to penetrate, a point that Chief Executive Officer Reed Hastings made very clear during the company’s fourth-quarter results conference call with analysts.
“We have the flywheel spinning in every other important market, and we will continue to do so. The thing that annoys us is why we haven’t had as much success in India, but we are nonetheless putting our efforts into it. “Hastings made this statement.
One of the daily news spoke with analysts who follow the streaming business to discover why Netflix has fallen behind in the Indian market.
Bundling was relegated to the background.
“Instead of combining their shows on platforms such as Hotstar, Netflix has not only chosen to go it alone but has also decided to make significant investments in original content in the process. Its growth has not been proportionate with the amount of money that has been invested, “Utkarsh Sinha, managing director of Bexley Consultants, shared his thoughts.
According to an EY 2021 estimate, telecom firms produced up to 85 percent of the viewership numbers of particular over-the-top (OTT) platforms in 2020. According to the research, data bundles were used by about 284 million consumers to access video content. By 2025, it is projected that approximately 400 million people will view content through telecommunications companies and aggregator bundles.
Prime Video Channels, a video entertainment marketplace launched by Amazon last year, brings together content from various partners, including Lionsgate Play, Docubay, Eros Now, MUBI, Hoichoi, Manorama Max, and Shorts TV.
Pricing and bundling have been identified as one of the primary reasons for Netflix’s poor membership growth in India.
Price increases are being resisted.
The platform, which announced pricing reductions in the Indian market last year, previously offered monthly plans ranging from Rs 499 for a basic standard definition plan to Rs 649 for a high-definition plan with four screens. The majority of experts agreed that, while Netflix is a premium platform, even for a premium platform, it was priced too high when compared to other top companies in the market, such as Amazon Prime Video and Disney+ Hotstar.
“Netflix is a high-end product that is one of the few to have chosen India as a market for distribution. For example, global competitors such as HBO Max and Showtime both suffer from similar cost-base difficulties that make India an undesirable market to enter. The only global competitor is Amazon Prime, which benefits from a significant cross-subsidization with Amazon that distorts its economics, “Sinha expressed himself.
Regarding Disney+Hotstar, which broadcasts cricket material such as the Indian Premier League, Nitin Menon, co-founder of NV Capital, a lending fund for the media and entertainment sector, stated that platforms like Hotstar provide sports content, which is a significant draw factor for viewers.
“There may be 70-80 million paying consumers in India, but predicting at what price point they will subscribe to service is challenging. Indian customers continue to be highly price-sensitive, making the country one of the cheapest marketplaces in the world for over-the-top (OTT) content, “Menon expressed himself.
The primary focus was on public transportation.
Elara Capital analyst Karan Taurani believes that while Netflix is changing its pricing approach by first offering a mobile-only package and then cutting its prices, its concentration on specific markets will be more critical in the long run.
“They have a considerable depth of content, but the majority of the shows are focused on the metropolis, and the majority of them are in English, with a few in Hindi thrown in for good measure. The material available on the site is aimed at an urban-centric-metropolitan audience. The importance of content localization is critical if they are to access the Tier I and Tier II markets successfully, “he explained.
“When it comes to regional language attention, it will be critical,” said Taurani when it comes to content localization.
Because of a scarcity of local material
“The market in the South is vast. When you look at both TV and on-demand consumption, you will see high. As a result, it is impossible to grow in this market without concentrating on the South. “He went on to say more.
Menon pointed out that, in the beginning, Netflix devoted a great deal of attention to Bollywood films. “They have just recently realized the importance of regional markets and have begun to cater to such markets in the last year or so. Their plans include expanding their operations to the southern United States and providing services to this market.”
Sinha believes that Netflix has one significant edge and that this advantage is the ability to create material that is capable of delivering worldwide hits. “Consider the heist of money. This company also has similar hopes for Indian material to reach worldwide audiences, but so yet, that wager hasn’t turned out to be particularly profitable.”
Regional content has taken center stage in the strategies of the majority of over-the-top (OTT) providers in India. The emphasis is on expanding restricted content, from Zee Entertainment’s streaming arm ZEE5 to Viacom18’s Voot, which recently launched its first Kannada web series, to name a few examples.
According to the EY report stated above, by 2025, regional language consumption on OTT platforms would account for more than half of all time spent worldwide streaming platforms. According to Taurani, the proportion of restricted content in original shows created has climbed to 50-60 percent in recent years, up from 20 percent three to four years ago.
According to Manish Kalra, the chief business officer of ZEE5 India, local content is the driving force behind the OTT content umbrella’s operations. “On ZEE5, regional language material accounts for nearly half of all viewership,” Kalra had previously stated in an interview with one of the daily news.
In 2020, the growth of various regional players such as Bengali OTT Hoichoi and Telugu streaming platform Aha, among others, will be a significant trend to watch. Hoichoi is projected to have over 15 million customers, making it the most popular OTT service among regional players. According to estimates, the platform’s subscriber base is comparable to that of Amazon Prime Video, which has an estimated 21.8 million paid customers in India.
Competitors are fierce.
As a result, Menon asserted that competition among OTT platforms has intensified, exacerbating the irritation associated with acquiring new users.
In India, over-the-top (OTT) platforms have increased fourfold in the last six years, from ten streaming services in 2014 to over 40 platforms in 2020.
Amazon Prime has 19 percent of the market share, followed by Netflix with 5 percent. Disney+ Hotstar has the most subscribers, accounting for 50 percent of the market.
According to a 2021 forecast by Media Partners Asia (MPA), a piece of advice, consulting, and research firm, Disney+ Hotstar is expected to have 46 million members (26.3 million in December 2020), Amazon Prime Video at 21.8 million (17 million), and Netflix at 5.5 million (4.2 million).
Netflix requires patience and time to develop.
Taurani stated that Netflix had achieved a significant increase in its user base and subscription video on demand (SVOD) revenue in India, although competition is fierce.
“While subscription video-on-demand (SVOD) sales in India have grown by 50%, Netflix has climbed by 60%. In addition, Netflix has a revenue share of 35-40 percent in the subscription video-on-demand industry. Last year’s SVOD income of Rs 1,500 crore, excluding sports, was an excellent result. They must double down on these figures in India, which means they must invest extensively on regional content, “he explained.
On the other hand, Netflix would have to wait a while before it becomes successful in India. “You must be patient while dealing with the Indian market. Netflix has only been around for around 3-4 years in India, and the OTT explosion is still in its infancy, particularly in the country; according to the company, “Menon expressed himself.
Taurani went on to say that price reductions were difficult. “Your number of subscribers will increase, but your average revenue per user (ARPU) will decrease. As a result, it is possible that SVOD revenue would not expand as quickly as predicted next year, “he explained.
edited and proofread by nikita sharma
