What can Netflix do differently to succeed in India ?

Netflix has had phenomenal success over the years as it expanded its footprint in US, Europe and other developed nations of the world. In Jan 2016 with exception of China; Netflix unleashed its growth engine to cover the globe and is now present in 130 countries. It’s recent expansion targets among them India which is home for second largest Internet users, second largest smart phone users and the largest population of 15-25 year young’s in the world.

Netflix rise from a DVD delivery player to largest Internet TV player has been no less than a miracle, a rare example of genius, hard work, luck and strategy working right. Over the Top Video has made astonishing gains in 2015 and the trend continues as consumers embrace Internet TV from companion to mainstream service. Netflix streamed 42.5 billion hours in 2015 and remains the poster boy of Online video by a fair margin against its competitors. But can it recreate its magic in India? We don’t know. What we know is that India is different and growth strategies, which have worked wonders in US and Europe may not entirely work in India. On the flip side, models that work in India could potentially add numbers in markets where Netflix has gone past its growth phase to capture remaining part of addressable market.

Is India Important for Netflix?

India not only has Bollywood but also has Tollywood (Telugu, Bengali), Kollywood (Tamil),  Mollywood ..and many more regional cinemas…. each with its own massive fan following. Every year India produces more than 1,500 movies, which is largest in the world but its effect falls short due to extreme shortage of movie screens. India has roughly 2,100 multiplex screens and another 13,000 single screens, which makes it one of world’s most under screened country, at less than one screen per 100,000 residents. Lack of cinema screens makes DVD rentals, online streaming and download great options for the film industry to take movies to masses. Online streaming delivery takes special significance as it offers far more convenience from available set of options. India is a country with large educated and spending population and has emerged as an important destination for enterprises around the world from retail chains to banks and from auto to planes.. the list remains endless. Netflix’s plans for India cannot be any different.

Netflix’s India Specific Challenges 

• Infrastructure and Regulation – Consumer Broadband infrastructure, CDN, public wifi etc. are not geared for mass video consumption. India further has limited number of residential broadband connections, small data limits, lack of connected media devices and tough censorship laws.
• Cost of Subscription – Netflix enjoys tremendous cost advantage in US and Europe where its Internet TV offering is much cheaper than traditional TV services (cable/satellite). Unfortunately it is not the case in India.
• Content – A large part of Netflix content is not licensed for India making Netflix- India offering sub optimal e.g. House of Cards is not available as rights were earlier sold to Zee in India.
• Competition – India has several streaming services like Hotstar, Sony Liv and the big Daddy of all – YouTube, each offering thousands of hours of entertainment under a freemium model. There is also good number of content rich and cheaper VOD service players like BigTV, YuppTV, NexGTv, Spuul and ErosNow who are continuously improving their offerings.

3 Things Netflix can do differently in India

Netflix was launched in India in January 2016 with first month free but the real subscription numbers will come to play as the free period phases out. It is still too early to predict if Netflix can grow beyond early adopters. Below are three areas which can make a potential difference

• Local Programming.  Indian TV viewership share of English content is very less with Hindi and regional languages commanding the largest share. India’s multi regional setup offers opportunities (as well as challenges) to create content in multiple languages and build a pan India offering. Investments in original programming across films, documentaries and series can infuse local talent and cultural mix to the existing catalog. Content partnership with large local studios like Balaji, Rajshri, T Series etc. can create continuous supply of rich local inventory. A “Make in India” content is critical and is relevant for entire Indian sub continent region as well as for large Indian diaspora around the world. Indians love Sports and News – a territory to test the waters before bringing similar services to wider markets.
• Innovation in Pricing. Cost consciousness is extremely high among Indian consumers and Netflix with its current pricing model makes a weak case. With a platinum cable subscription having 300+ channels is available for INR 500 – INR 600 a month, Netflix’s paid offering for INR 500 – INR 800 is a tough sell for mass subscription. Innovative pricing models are needed to reach the masses – tie ups with device manufacturers, bundling with broadband packages, genre based pricing, promotions and packaged deals or even revolutionary ad-based service needs to be explored. Netflix India needs a free basic tier with most basic, even a numbered content from its humongous catalog to get users to try Netflix services for extended periods before joining the club. At INR 99 a month ad based model can do wonders and become a reference case before taking the model elsewhere.
• Infrastructure  – Dependencies from slower broadband speed, usage of credit cards and lack of connected devices for large screen playout needs to be addressed.
  • Bundling broadband with Netflix subscription. Broadband speeds in India are relatively low and so does quantum of residential broadband connections. The largest pie of internet subscribers in India are mobile internet users which are expected to explode with arrival of 4G LTE services from players like Reliance (Jio) and Airtel. A bundled service (broadband connection + Netflix) with non metered (or subsidized) Netflix data consumption could be a winning model. It can also take the burden of managing subscription and user payment, which is a big hurdle with limited users having access to credit card services.
  • Bundling with streaming Devices – Across US and Europe, Netflix is available out of box with Smart TVs, streaming media players, game consoles, blu-ray players, tablets, PC and even few STBs. Except smart phones, India has limited penetration when it comes to connected Blu-ray players, media adaptors and Smart TVs with virtual absence of connected STBs. A mass market where Netflix can have a significant device play by introducing low cost devices (similar to Chromecast) or have packaged deals in partnership with device players. e.g. Smart TV, DVD players, streaming media devices from Samsung, Sony, Philips, Apple etc. offering time bound free Netflix subscription on purchase of their devices. This again takes care of individual account payments.
  • DVD distribution. DVD players are popular in India but DVD rental business is a failure due to low cost and easy availability of pirated DVD’s. Netflix’s DVD distribution offers one more option for consumers to enjoy great content in high quality. DVDs can potentially bring much larger supply of titles than what is available for streaming.

India needs to be an investment region for Netflix in short to medium term but offers great opportunities to experiment new business models.  Netflix’s India journey done right can bring it needed success to grow and sustain its subscription empire and ultimately fuel its growth for years to come. Netflix needs to win in India.