In 2017, to a question on who is Netflix’s biggest competitor, its CEO Reed Hastings gave a reply that defined the company’s ambition: “You know, think about it, when you watch a show from Netflix and you get addicted to it, you stay up late at night — we’re competing with sleep, on the margin.” From that day onwards, buying into the immense potential that the OTT leader promised, journalists and analysts stopped comparing the company with the likes of HBO, Amazon and any other entertainment platform that was considered its competition.
But, four years after that call, Hastings seems to be losing his sleep on another question: why has the company not been able to crack the India market till date? In an investor call on January 20, Hastings said that the lack of success in the Indian market was “frustrating”.
Netflix’ current subscriber base in India is pegged at above five million, about a ninth to rival Disney+ Hotstar’s 46 million and above a fourth to Amazon Prime’s 22 million.
As soon as the news of Hastings’ statement on the Indian market went viral, many critics blamed the company’s content strategy for its failure. They accused the OTT platform of catering to only one segment of the society, often considered woke and elitist. The reference was to series like Laila and Sacred Games among others, along with award winning international movies.
Calculating Target Audience
Netflix entered the Indian market in 2016, when an average Indian earned just Rs 95,751 per annum, with subscription plans starting Rs 6,000 a year. Its top plan costed Rs 10,200 a year then. It was going to be a daunting task to convince Indians to pay for entertainment with such high subscription charges that required additional expenditure of about Rs 1,000 a month for high-speed broadband connections. By making its content premium, Netflix chose a maximum of top 10% Indians as its potential market.
On the other hand, Amazon Prime launched its services at Rs 499 per annum, which it later increased to Rs 999 per annum, while Disney+ Hotstar sells its VIP plan at Rs 399 per annum. Domestic competitor, Zee5 gives its service at just Rs 365 per annum, providing enough options to a large OTT consumer base to have quality content without having to shell out a bomb.
By choosing to price itself on the higher side of the subscription plans, Netflix focused on revenues over growth, something that goes against the grain of the philosophy that governs new-age companies. A possible reason why Netflix chose that route was that it did not expect the Indian OTT market to take off the way it did. From its pricing and content acquisition strategy, it looks like Netflix expected the OTT phenomenon to stay within the confines of urban drawing rooms.
Reading the Indian Mind
Unlike the Netflix’s disruption, another company was trying to redefine the choices of Indian consumers around the time the OTT major entered the country. Jio was the last entrant to the Indian mobile telephony market, yet it managed to capture the entire market within two years on the back of its unlimited voice calls and free 1.5 GB per day internet offer. The disruption was so significant that every other player in the market was either edged out or matched the Jio offers. In a way, one can say that the Indian OTT space exploded once mobile devices got connected with cheap data.
When Disney+ Hotstar and Amazon Prime optimized their subscription plans for the mass Indian market, they seem to have followed the Jio strategy. In the process lay a realisation that Indians consume a lot of video content, and they do it on smartphones. It is a well-established fact in the world of computing that Indians have a low adaptability as a percentage of population for bulky devices, like desktops, laptops or tablets. Social media in India has grown on the mobile devices in the hands of Indians. Any entertainment-centric service that ignored this reality was never going to become a favourite with this constituency.
A large number of regional OTT Players have emerged in India since the entry of Netflix which have captured the audience that can afford to pay for customised content. OHO Gujarat, Aha and SUn NXt have captured their respective markets by catering to localised taste in Tier II cities of India. While Netflix also offers regional content, it cannot hold superiority in scripts and production quality that sets it apart in the English genre content.
Another factor that has gone against Netflix is its inability to focus on quantity. Netflix appears as an expansive deal in the limited quality of content on its platform. The company has invested around Rs 3,000 crore in the last two years and has produced 70 originals since coming to India. It clearly does not meet the requirement of Indian viewers who spend around 11 hours per week streaming online OTT content compared to the global average of eight hours per week.
Netflix also seems to have underestimated its role in catering to another Indian obsession, that is cricket. Cricket as an OTT genre is controlled by Disney+ Hotstar in India. During a live event, cricket overtakes the consumption of all other forms of OTT content in India. In the recently concluded T20 World Cup, Disney+ Hotstar hit a peak viewership of 12 million in the India-Pakistan match. Since India plays cricket for eight to nine months in a year, it ensures natural substantial growth in subscription for the platform. Apart from Cricket, Disney+ Hotstar also holds rights for other sporting events, including Pro Kabaddi league and US Open among others. In fact, global analysts believe that Disney+ Hotstar’s India revenue is so dependent on cricket, especially IPL, that the company’s revenue per user fell from $2.19 in the September 2020 quarter to just $0.91 in the December 2020 quarter (when IPL ended). This is one reason why Netflix’s average revenue per user continues to be higher than Disney+ Hotstar and others.
Coming back to the original question: is Netflix losing out to others in India because of its woke content? Certainly not! All it needs is the right mix of content, pricing and patience.