Netflix announced this week that it is launching its operations in India. This launch is part of a global announcement that saw Netflix being simultaneously launched in over 130 countries.
Netflix begins India operations
Netflix will be available in three subscription packages---- Rs 500, Rs 650 and Rs 800, with a free subscription for the first month. It is also rumoured to be seeking partnerships with local telecom firms like Reliance Jio and Bharti Airtel to make use of their 4G networks in the country.
According to a media report, US-based Netflix has borrowed $1 billion to fund its international expansion.
Netflix has around 69 million subscribers across 50 countries. Apart from its service, it has also become popular for producing original content like House of Cards, Daredevil and Orange is the New Black. In the US, subscribers pay $8.99 a month for watching HD-quality movies and TV shows on any two screens at the same time so the Indian prices are about on par.
Netflix Could Impact Content Monetization
One of the reasons why Netflix’s entry and its subscription-based model are interesting because it raises the all important question? Is the Indian consumer ready to shell out money for online content?
Netflix’s entry is being welcomed by the Indian broadcasting industry, which is watching developments closely.
“It will be interesting to see how Netflix changes the game in Subscription Video on Demand (SVOD) since it’s a subscription-based model whereas Hotstar is completely advertiser-based,” says Nikhil Gandhi, VP (Revenue) at Media Networks for Disney India.
This is a challenge to Netflix’s entry with most of the other players like Hotstar, SonyLiv and Spuul being driven by advertising revenue. Many believe that the Indian consumer is still not ready to cough up money to watch content. And this is where it will be interesting to see what impact the entry of Netflix has.
“The Indian market is used to free content. How they will counter this reality is a big question? Also, data usage prices are high so it needs to work around that as well as figure out its TG. Its viability and sustainability is a wait-and-watch situation here (in India),” said Manav Dhanda, Group CEO of Sri Adhikari Brothers Television Network Limited, listing out the challenges.
As Dhanda points out, “The whole objective is to create a habit of consuming content online and build loyalty long term.” Can Netflix’s stable of popular and critically acclaimed content succeed in doing this?
Subscription v/s advertisement: Will Netflix tilt the balance?
As we mentioned earlier, Netflix’s subscription-based model might seem radical for the Indian market and with Netflix having announced that it is not looking to provide free content, they will have to figure out a business model that takes into account the unique Indian context. Of course, first month subscription is free but that is just to whet the appetite of the audience.
Having said this, the industry is confident that SVOD is the way to go forward irrespective of the fact that it will far from mature. Netflix’s arrival will open the door to more players in this category, opined industry experts we spoke with.
Agreeing that SVOD has huge potential in India, Uday Sodhi, EVP and Head (Digital Business) at Multi Screen Media said, “The journey has not even started in India. We need few more players from advertisement and payment perspective. With better infrastructure (bandwidth and payment model) monetisation around VOD will get better over the period of time. It will drive awareness about the service.”
Sodhi opines that in two to three years subscription and advertisement will balance it out. “Content will become monetised around advertisement and subscription,” he said.
Such hybrid models are something which are even now being explored by OTT operators with varied success. Could the entry of a recognized player like Netflix help turn the tide?
But not everyone believes that this will happen overnight or even in the next couple of years.
According to Rajiv Dingra, Founder & CEO of WATConsult, advertising will continue to play a major role for next five years and it’s a battle ahead for subscription-based models. He pointed out that business models follow a cycle and so there are high chances that paid content will make a comeback. “Subscribers will drive the cream and this model will take over a decade to achieve scalability; a win-win situation for content players. In the beginning it was about paid content. Then technology disrupted and everything was free. Now there is premium as well as free content. Later it will become paid content again,” he opined.
Dingra points out that Netflix’s success depends on its monetising model, which is linked to payment, which is evolving rapidly. “I don’t think it’s going to be a Big Bang entry for Netflix. It’s not looking to be a number one in 6 months. It’s a gradual process.”
Most importantly, Netflix needs to get a firm footing in a vast market like India.
Like Kaushal Dhoker, Brand Manager (Digital Marketing) at &TV points out, “Currently its challenge is to get more viewers, educate and inform them about its content. People need to adapt to Netflix. Once that happens considerable base is created which will peak advertisers’ interest to invest on it.”