NETFLIX: Lack of Success in India has been ‘Frustrating’ says CEO

Netflix has made little progress in India, where it hopes to gain its next 100 million registered users. “We’ve got the flywheel spinning in every other major market.” “It frustrates us that we haven’t been as successful in India yet,” Netflix co-founder Reed Hastings said on a January 20 earnings call. He did add, however, that the company is “definitely leaning in there.”

Netflix, the streaming entertainment giant, incorporated 2.58 million paying users in the Asia Pacific countries in the final quarter of 2021, the most in over one year, thanks to large and powerful growth in India and Japan. Asia is, without a doubt, the company’s littlest region, trailing North America, Latin America, and Europe. The 32.6 million registered users in the region make up 14.7 percent of the company’s total 221.84 million users.

Moreover, as Netflix, centred in Los Gatos, California, depends heavily more on international markets for expansion, the Asia region is becoming highly significant. Due to successes in South Korea and Japan, Asia has been one of the major contributors to the company’s user inclusions in previous months.

Netflix recently lowered its service charges by up to 60% as part of a two-pronged scheme to make it India’s preferred source of entertainment. According to Hastings, the existence of well-established cable TV companies is Netflix’s greatest obstacle. “India is different in that it has cable. It costs about $3 per month per family. So there’s a vastly different cost structure than the rest of the globe, which has an influence on the consumer requirements,” he explained.

Even as Netflix hasn’t ever disclosed the quantity of Indian viewers, industry experts estimate the figure between 4.3 million and 4.5 million, a portion of rivals Disney+Hotstar (nearly 36 million) and Amazon Prime Video (nearly 4.5 million) (over 17 million).

Netflix COO Greg Peters said during the earnings announcement that now was the appropriate time to lower rates in India as they evaluated their operations to expand their offerings.  “We also wanted to do it across the range of plans that we had under the theory that some of those features, such as the ability to watch on TV with a basic plan, unlocks more value in the service and thus creates more retention and attractiveness,” Peters said. “We’ll make up for the drop in ARM (average revenue per member) with more subscriber adds (additions) as a result of the price cuts.”

“I believe it is still too early to consider India.” And it takes a couple of months to get a very clean read on some of these effects, such as retention,” he continued. “However, the early data we’re seeing strongly suggests that the lens of revenue maximisation through these changes is a positive read.”

According to an EY report, India has the world’s second highest number of internet users after China, with around 570 million internet subscribers growing at a rate of 13% per year. After two years, Netflix, the first global OTT service to launch in India in 2016, began assembling a team and investing in original content. Hastings announced in 2018 that the company would spend Rs.2,000 crore on content in India over the next two years, more than the combined programming budgets of the top four Hindi general entertainment networks.

Netflix, according to Peters, is still optimistic that India will not be clearly distinct from other countries where the company has had to overcome obstacles before succeeding, such as Brazil.

Netflix is doubling down on its recent foray into gaming. In 2022, the company plans to expand its game portfolio across both casual and core gaming genres, according to the company. According to Peters, the company is open to licensing large game IPs (intellectual properties) that are well-known. “I believe you’ll see some of that over the next year,” he predicted. Peters described the company’s internal development capacity for its own game studio as “a massive long multi-year option.”

Netflix’s strategy and approach of “throwing money at every problem,” according to experts, is to blame.