Netflix co-CEO and co-founder Reed Hastings has yet to come to terms with the Indian market.
On the one hand, shows such as Squid Game, Money Heist, amongst others have successfully wound their way into the lives of the Indian middle class. On the other hand, Netflix India is still not raking in the moolah. In the post-result webcast, Netflix CXO’s discussed the financial performance of the major Company for the fourth quarter of 2021 and projections for Q1 2022.
During the webcast, the team admitted that they were slightly stumped by the Indian market and are still learning and figuring out the right market strategy.
The company has entered allegedly ‘difficult’ newer markets such as Japan and Brazil, and “got the flywheel spinning,” Netflix co-CEO and co-founder Reed Hastings said. “The thing that frustrates us is why we haven’t been successful in India. But we are definitely leaning in there.”
“It took us quite a while to unlock all of these components, product-market fit, get the right content, all these different pieces (for Japan and Brazil). We are quite bullish that India isn’t fundamentally different in some way and that we can’t figure out how to tailor our service offering to be attractive to Indian consumers who love entertainment,” co-founder Greg Peters added.
Yin & Yang
India, for Netflix, is one of the smallest markets in terms of paying consumers, yet it is one of the largest in terms of total OTT consumption, with about 102 million paying OTT users, expected to grow to 224 million by 2026 and reach a market size worth $55-70 billion by 2030.
To capture this market size, Netflix had lowered its subscription prices across all its plans on December 13, 2021. Yet, it fails to figure out the right product-market fit in India. Thus, the price decrease and the US-based company’s plans to acquire the Indian content consumer market was a subject of a longer discussion at the webcast, according to an Inc42 report.
The report further added that the response was quite similar to what Hastings mentioned post-Q4 CY2020 results. Hastings compared the Indian market to the Japanese and South Korean markets from five years ago. He added that in 2020, Netflix did some pricing experiments in India calling it a ‘speculative investment’.
Back then, too, Netflix’s major proposition for the Indian market was the content, programming partnerships and localisation of content.
Netflix Group CFO Spencer Neumann further added that every country is on a different adoption curve and has a different product-market fit. “Even though everyone loves films, television and games, entertainment is still fundamentally pretty local around the world. So it’s global and local, and we need to figure out what product-market fit-out.”
To this, co-CEO Ted Sarandos added that Netflix India is now looking forward to building original content in India. “Towards building a good product-market fit, content that people love, a value that fits through their life and product they can’t live without,” Sarandos said.
Shedding light on the fact that Netflix has been increasing prices across the world, Peters claimed that the company offers unmatched content, be it TV shows or movies, and now it is also bringing gaming to the mix. Thus, it was the right time to ask consumers worldwide to pay more, the report said.
in India, Netfilx has for the second time reduced its prices. “What’s unique about India is cable, which is about $3 (INR 225) per month per household, which is radically different pricing than the rest of the world, does impact consumer expectations,” Hastings said.
Since the price is a difficult barrier, Netflix has modeled prices in a way that may reduce its average revenue per member. Yet, it eventually aims to increase more subscribers and consumer retention.
Peters also highlighted that an early read into the effect of the price drops has been encouraging for the video-on-demand company.
He further added that Netflix’s decrease in subscription price in India follows a slew of activities the company has been doing. These include catering to Indian consumers’ tastes, broadening service offerings across many different dimensions, and creating content and programming partnerships (such as bundled offerings with data providers) that appeal as attractive to more people in India, the Inc42 report pointed out.
“Looking at the total of all the activities, it was the right time to decrease our prices there to increase the accessibility of the content to more Indian consumers,” Peters added.
This time, the price reduction comes across all modes of watching, not just mobile. Earlier, Netflix introduced a mobile-only plan mirroring an entry point for price-sensitive Indian consumers.
Netflix’s approach towards local content has not got off to a good start. According to LetsOTT Global, Netflix’s big project ‘Baahubali: Before the Beginning’ has now been shelved. The team has swiped out the 150 crore version after 6 months of shoot and post-production, as they are not happy with the visuals and the end product. The company had announced this on twitter.