netflix india: Netflix’s lack of success in India ‘frustrating’, cofounder Reed Hastings says

Netflix cofounder, president and co-CEO Reed Hastings said in an investor call on Thursday that the lack of success in the Indian market is “frustrating” but added that the company is “definitely leaning in there”.

The Los Gatos, California-based global streaming giant, which saw its shares tumble after it said it expects to add just 2.5 million news subscribers in the current quarter—the lowest for the first quarter in close to 10 years, added 2.6 million new paying subscribers in the Asia Pacific region in the last quarter (compared to 2 million in the same quarter last fiscal), with strong growth in both Japan and India.

While Netflix has never revealed the number of subscribers in India, market estimates place the figure between 4.3 million and 4.5 million, a fraction of rivals Disney+Hotstar (close to 36 million) and Amazon Prime Video (over 17 million).

Earlier in December,
Netflix had slashed pricing in India to make the service affordable to a wider set of consumers. But many experts believe the move will primarily add subscribers who were already using the service through account sharing.

The change in pricing follows a whole set of activities that the company has been doing in India over the years, Greg Peters, Netflix’s chief operating and product officer, said during the webcast on Thursday. “We have been operating there and learning more about Indian consumers’ tastes, et cetera, and that’s broadening the offering of the service across many, many different dimensions,” Peters said. “We felt it was the right time to decrease our prices there, to increase accessibility to all… we’re doing this through the lens of what’s the long-term sort of revenue maximisation.”

Peters said that while Netflix anticipated a drop in the average revenue per member because of the price cuts, it would make up for it with more subscriber additions.

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“I would say it’s still very early to look at India. And for some of these effects, like retention, it takes a couple of months to get a very clean read on them,” he said. “But the early data that we are seeing very much supports a positive read on that lens of revenue maximisation through these changes.”

Earlier, Hastings said that a unique thing about India was the pay TV pricing, at around $3 per month per household. “Radically different pricing than the rest of the world, which does impact consumer expectations,” he said.

When asked if Netflix will consider sort of right sizing content spend or maybe consider an ad-supported model, he said that it will be a long time before the company adjusts its model materially.

“In our experience in Brazil, it was brutal for the first couple of years. We thought we’d never break even. I know we’ve got this great business… The great news is that in every single other major market, we’ve got the flywheel spinning. The thing that frustrates us is why haven’t we been as successful in India, but we’re definitely leaning in there,” Hastings said.

Netflix, which was the first global OTT service to launch in India in 2016, started building a team and investing in original content after two years.

Hastings said in 2018 that the company was going to invest Rs 2,000 crore in two years on content in India, more than the combined programming budgets of the top four Hindi general entertainment networks put together.

However, many of the shows and films have yet to attract large numbers of subscribers.

Experts blame it on Netflix’s strategy and approach of “throwing money at every problem”.

“One of the biggest issues with Netflix in India is that there is no clarity on which market they are playing in. Is it reasonable to pay Rs 85 crore for a ‘Sooryavanshi’? They have always been infatuated with Bollywood, and the regional strategy is also too little too late,” said a senior executive at a rival service.

A senior executive, who left Netflix last year, said that the brand is very strong, but they must work on whether they want to focus on retaining a subscriber and increasing engagement from her or add new subscribers.

“In India, it’s only the first,” he said. “Also, when I was at Netflix, it seemed we all stopped thinking about the ROI (return on investments). We all had an unlimited budget to spend on content, marketing, publicity, and so on.There was no question of accountability, ” he said.

During the investor call, Netflix Group CFO Spencer Neumann said while the company has, what they believe, a “terrific business” and a “terrific business model” that scales so well, it’s also super hard in every country.

“Every country is on a different adoption curve, and we talk about product market fit, but even though everyone loves film, TV, and even games, it is very specific. Entertainment is still fundamentally pretty local around the world. So it’s global and local, and we need to figure that out, ” he said while answering about India.



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