Posted on July 28, 2019 at 8:28 pm

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Netflix its strategy in India

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After an overwhelming response to our first article about Disney+NikitaShreyas and Puneet are back again with our second article.

This time, we have chosen a company which is closer to our hearts and one that is top of mind for most entertainment professionals—Netflix.

Anyone who knows us knows that we are ardent fans of Netflix. There was a time at Hopkins wherein we used to buy a drink in a bar and our conversation was surrounded only on one topic. Not girls… Not grades.. but ‘Netflix and Netflix’s impact on the industry, syndication business and traditional linear programming’.

So last week, we met at a bar and outlined on the backs of cocktail napkins the ways our favorite company could succeed in India. We started with the basic facts. According to us, what makes India so valuable is its rise in internet population (around half a billion).

There are only two countries with over 1 billion population and India is expected to take over China in 2030. With China being a closed market, India is promised to become the world’s largest internet consumption population in the world.

Reed Hastings said during his talk at the Economic Times Global Business Summit in New Delhi in August of 2018, “Given the consumer base, the next 100 million [subscribers] for us is coming from India.”

To move forward with Reed Hastings’ plan, Netflix started its operation in India in 2016 and opened an office in Mumbai in 2017. By the end of 2018, Netflix moved to a humongous 150,000 square foot office and have multiple original content focused on Indian audiences. Less than 6 months ago, Netflix announced eight new original films and one new original series from India.

While Netflix has succeeded in acquiring some big titles such as Baahubali series and content production deal with Red Chillies (owned by Shah Rukh Khan), Amazon PrimeVideo has secured the rights to theatrical projects of many top Indian studios such as Dharma ProductionsExcel EntertainmentT-series, etc. Still, it is clear to us that Hotstar is ruling the OTT (Over-The-Top) market share in India. As of 31st March 2018, Hotstar is leading its way with a market penetration of 69.4% while Amazon Prime & Netflix penetrations are in singular digits.

It is not easy to succeed in a behemoth country like India. It has 1.3 billion people and nearly 2,000 languages and dialects! Cities 100 miles apart can differ greatly in faith, language, sports preference, wealth & income, food types, and political parties. Given the population and diverse languages, it isn’t a surprise that the Bollywood entertainment industry is considered one of the largest entertainment industries in the world estimating around $2.89 billion (₹193 billion).

So then how can a content creator get it right in a country so diverse? There is no “one size fits all” model for India.

Here are our four cocktail napkins strategies on how Netflix can gain the audience at a grassroots level and beat out its competitors. (P.S – Before we start, all our recommendations are focused on how Netflix can reach grassroots of India and not just limit itself in the metropolitan cities).

1. Price Restructuring

Purely from the comparison, we understand the disparity between Netflix and the other two services. If Netflix has to capture more subscribers, we believe it will have to bring down its price as India is a price-sensitive country. We have two data points to support this viewpoint-

  • 90% of India’s population belongs to the base tier when it comes to the distribution of wealth (earning less than $10,000, or about Rs 730,000). This implies that 90% of the population is bound to look for the most economical way of consuming content and with the plethora of economical OTT options available, people wouldn’t miss Netflix. Some might say, “If Netflix comes up with its original content, people will have no option but to buy Netflix services,” We say – “Not true because people will find other ways to consume that content.. and that is piracy”.
  • That’s right, this brings us to our next data point. India has been identified 5th when it comes to illegally downloading movies and content from peers between January 2017 and May 2018. The advent of Netflix and Amazon has taught us that if we make amazing content available to the masses at affordable prices, people won’t opt for piracy but the important words here are ‘amazing content’ and ‘affordable prices’. If the content is amazing, people will find a way to consume it and the only way to get around it is if the government takes strict actions against those who download content illegally but this is completely out of the jurisdiction of Netflix or Amazon.

The above two data points tell us why it is important for a content streaming service to keep its price affordable to win the majority of the Indian population.

Instant fix – Netflix is testing a $3.64 mobile plan in India. Although it is still higher than its competitors i.e. Amazon Prime and Hotstar, we still think it is a move in the right direction.

2. Family-oriented content

Before we understand this point, let us look at that one thing that makes India so intriguing – India’s culture and beliefs.

India is considered as a collectivist society with an emphasis on activities that enable the family to spend time together. As it is common to observe a family encompassing wider family circle sometimes even multi-generational, this also impacts the decision and how content is consumed.

According to Broadcast Audience Research Council (BARC)’s research, 82% of people in India watch TV together which means that it impacts the choice of content of the viewers – this means that content such as Game of Thrones, Ozark, Entourage might not be considered appropriate to watch with family due to the explicit graphic content but something like Friends or The Office might work. However, we forgot to look at another important element of India i.e. India’s English speaking population.

According to BBC News, only 10% of India’s population (125 million people) speaks English and is comfortable in conversing with English. This means that not Friends, The Office, Ozark, or Game of Thrones but something such as Big Boss (India’s reality show) or Naagin-3 (India’s soap-opera) has the highest TRP (television rating point). According to us, the highest TRP show doesn’t endorse the best show but rather the best available show that the entire family can watch together. If the show has any explicit content (e.g. Sacred Games), chances are the family would not be watching it together.

So Netflix will have to develop a programming strategy understanding the Indian culture and its sensitivities. It might also mean getting its hands dirty with few Indian reality talents shows or venturing into Indian soap operas.

Instant fix – To offer a Kid/Family-Friendly filter option that removes the explicit content thereby making it safe for the family to view it together

3. Focusing on regional content

To understand the importance of regional content, let us look at the case study of one of the largest telecom companies.

In 2016, India’s largest telecom company, Jio, announced unlimited 3G data for anyone purchasing a phone connection. As a result, India saw a big swing of subscribers preferring Jio over other telecoms, many of whom had been in India since the advent of 2G (another proof point that India is cost-loyal and not brand-loyal).

Unlimited data did not do much for the affluent class of India (who could afford Netflix) but it changed the life of daily-wage earners of India.

Remember the data point that only 10% of the India population speaks English? Unlimited data plans changed the life of the other 90% as the cost of consuming content came down. Now, that 90 % of the population had plenty of options to consume content made in their language. They started consuming content at a rapid speed and this formed the Indian population who had no idea about OTT but had formed the habit of regularly logging onto the available OTT channel with regional content.

And guess what?! Netflix had hardly any regional content back in the day. This meant that the Hotstar and other OTT players were ready for such an opportunity and established themselves as the go-to OTT channel for the other 90% Indian population.

Having regional content can attract many thousands of people and most people in India are price sensitive but brand-agnostic i.e. as long as they get their regional content at their fingertips and economical prices, they are easy to be satisfied.

Instant fix – To offer subtitles/voice-over in more local languages. That could be a feature based on geolocation detectors based on IP address. For example – have Money Heist in Indian languages.

4. Cricket – the sport that unites the entire country

Cricket is considered a religion in India. Cricket is the only sport that unifies the entire country together. In India, one has always seen a spike in the number of televisions sold before the cricket world cup including this year where “television sales have risen 25-30 percent since the first week of May” due to the cricket world cup.

To give you an idea about the viewership, in 2015, Super Bowl XLIX had a total 114.4 million viewers whereas a single India vs Pakistan world cup match in 2015 alone garnered over 1 billion people all over the world with more than 288 million people watching in India alone. This year the Indian Premier League (India’s very own version of EPL for cricket) had 267 million viewers.

We took a screengrab from India vs New Zeland semi finals world cup match yesterday (10th July 2019). At one point in time, there were nearly 12 million paid viewers watching it on Hotstar. This image is a testimony to the fact that cricket will always attract a reasonable audience for any OTT channel.

If these data points aren’t enough, let us look at another data point.

For this year’s Indian Premier League, Facebook won the digital rights for $121.6 Million. Even Amazon decided to sponsor a small segment in this year’s cricket World Cup i.e. ‘Amazon Prime Super Sixes’.

Facebook & Amazon have realized the value a cricket tournament can bring but we haven’t seen any hint/intention from Netflix to venture into ‘cricket’.

Now, some people might say that Netflix is not into live events and airing a live event (cricket) sounds like a different business model. To that, my question is “What would have happened if Netflix had not ventured into streaming from DVD renting because it’s a different business model?”

Having cricket in its offering has given Hotstar a huge boost to its numbers of subscribers. Even Disney’s CEO Bob Iger mentioned Hotstar viewership during the MoffettNathanson Summit in New York on 15th May 2019. “They had 18.6 million viewers watching that match at one time, which I am told is a record,” Iger said, adding, “So we have a presence in television and direct-to-consumer business in India, which will soon be the most populous country in the world that we never had before.”

Acquiring the rights to cricket and offering it to subscribers at an affordable price will guarantee incremental subscribers for Netflix. As a media professional and someone who has spent the better part of my life in India, we can say this with assurance – Netflix getting the rights to relay cricket will help strengthen its foothold in India.

Instant fix – To get into partnership/acquire ‘Willow’- an OTT service focused on relaying live cricket matches.

Conclusion

With the announcement of Disney + and with many of Netflix’s most-viewed titles expiring soon, we believe it will have to make some bold steps in establishing its dominant position in India and if we had to pick one strategy that would definitely work for Netflix, it would be acquiring the rights to air cricket and acquiring a studio/franchise that focuses on niche content specifically catered to the Indian family audience.

Example – A remake of the Mahabharata/Ramayana focused on Indian audience can be a safe bet or acquiring the rights for the books- Jaya or Sita by Devdutt Pattnaik (a very different/unique viewpoint on the age-old Indian mythological stories), identifying the next reality show that the families can watch together or even optioning the rights to the vast untapped Indian comic characters.

Entertainment does a great job in uniting people in India and if Netflix has to penetrate further into India’s corners, it has to come up with content that can be celebrated by the family together and thus becoming an indispensable part of their day-to-day life.

Disclaimer

We understand and acknowledge there are veterans (whom we admire) sitting at the Netflix HQ trying to solve the same puzzle and our recommendations exist only because we admire Netflix and all that it has achieved in a short period.

References

BestMediaInfo Bureau. (2018). 82% of population watches TV together, impacting choice of content: BARC India. Retrieved from https://bestmediainfo.com/2018/10/82-of-population-watches-tv-together-impacting-choice-of-content-barc-india/

Internet users in India. (2019). Retrieved from https://www.statista.com/statistics/255146/ number-of-internet-users-in-india/

ICC Cricket World Cup 2019 boosts television sales … (2019). Retrieved from https://www.moneycontrol.com/news/business/companies/icc-cricket-world-cup-2019-boosts-television-sales-4048651.html

Keelery, S., & Richter, F. (2018). Infographic: Hotstar: The star of the Indian video streaming market. Retrieved from https://www.statista.com/chart/15939/indian-video-streaming-market-share/

Livemint. (2018). India among top five countries for peer-driven piracy. Retrieved from https://www.livemint.com/Consumer/MuPSerb5XHOhFQVhoqI8JN/India-among-top-five-countries-for-peerdriven-piracy.html

Modak, S. (2018). 91% of India’s adult population has wealth below Rs 730,000: Credit Suisse. Retrieved from https://www.business-standard.com/article/economy-policy/wealth-inequality-in-india-stark-compared-to-us-china-credit-suisse-study-118101801033_1.html

Molla, R. (2018). Here are some of the most popular shows on Netflix – which may be leaving Netflix soon. Retrieved from https://www.vox.com/2018/12/21/18139817/netflix-most-popular-shows-friends-office-greys-anatomy-parks-recreation-streaming-tv

Netflix Announces Eight New Original Films And One New Original Series From India. (2018). Retrieved from https://media.netflix.com/en/press-releases/netflix-announces-eight-new-original-films-and-one-new-original-series-from-india

Star India wins IPL rights for US$ 2.55 billion. (2017). Retrieved from http://www.espncricinfo.com/story/_/id/20570244/star-india-wins-ipl-rights-us-255-billion

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