Will an ad-supported lower-priced plan move the needle for Netflix in India?

Industry observers say Netflix needs to come up with an India-specific strategy and invest in mass content

e4m by Javed Farooqui
Published: May 13, 2022 8:24 AM  | 5 min read

Netflix's plan to come up with a lower-priced ad-supported subscription plan has failed to enthuse the Indian OTT market. Experts believe that the strategy will have a negligible impact on the Indian market, which has a plethora of mass OTT services that follow a hybrid AVOD + SVOD model.

The announcement was made last month by Netflix Co-Chief Executive Officer Reed Hastings in the backdrop of the platform seeing a drop in subscribers for the first time in a decade. In Q1 2022, the platform lost 2,00,000 subscribers.

"Allowing consumers who would like to have a lower price and are advertising-tolerant to get what they want makes a lot of sense. So that's something we're looking at now. We're trying to figure it out over the next year or two. But think of us as quite open to offering even lower prices with advertising as a consumer choice," Hastings had told analysts.

As per the latest reports, Netflix has told its employees in a recent note that the lower-priced ad-supported tier could be launched by the end of the year. The video streaming giant is aiming to introduce the ad-supported tier in the final three months of the year. It is also coming up with measures to crack down on password sharing.

A senior executive with a top OTT platform said that the video streaming platform needs to come up with an India-specific strategy rather than implement an international strategy in a diverse market like India.

"Netflix needs to have an India-specific strategy. Many companies have tried to impose an international strategy in India and failed miserably. Netflix's content and distribution strategies have many gaps. If it wants to scale up in India, it must have content that has mass appeal. It also needs to spruce up its distribution to ensure a wider reach," the executive said, on the condition of anonymity.

He also noted that a pure SVOD strategy has its limitations in a market like India where AVOD rules the roost. "In India, a lot of people have the potential to pay for content but not everyone has the propensity to pay for content. It's all about the value that someone attaches to content. In India, piracy is a big problem whether it is the content or the software industry," the executive added.

The executive also noted that an ad-supported lower-priced plan might not lead to a major spurt in Netflix's subscriber numbers. He pointed out that the impact of recent price cuts was yet to yield the desired results. "To drive long-term growth, Netflix needs to invest in mass content like sports, regional, and non-fiction. Disney+ Hotstar is the behemoth that it is in India thanks to cricket," he stated.

According to Aqilliz Chief Business Officer Rajeev Dhal, the SVOD business has limitations when compared with AVOD. He pointed out that ad-supported YouTube's revenue was almost matching the revenue of Netflix, which is a pure-play subscription service.

He also said that reducing prices will help Netflix to win over fence-sitters. However, the nature of content offered by the platform in India is a huge limitation in achieving scale. He also feels that launching an ad-supported lower-priced subscription plan might lead to cannibalisation.

"Netflix is sitting on a data goldmine that is crucial for brands. Since it has a creamy layer of the audience it can attract a lot of premium brands. Even if the ads are not shown on Netflix, brands can target those audiences outside the platform on the basis of cohorts," he stated.

Hastings had also stated that Netflix "can be a straight publisher and have other people do all of the fancy ad-matching and integrate all the data about people. So, we can stay out of that and really be focused on our members creating that great experience and then again, getting monetized in a first-class way by a range of different companies who offer that service".

Sharing a different perspective, Kurate Digital Consulting Senior Partner Uday Sodhi says an ad-supported lower-priced subscription plan might not move the needle for Netflix in India. "What is SVOD market today without live sports? If you remove live sports, which is half of the subscription market, then you are left with a 20-25 million kind of universe for SVOD. Within that, Netflix has 4 million subscribers, so how much more can they scale up just with a lower-priced plan? They need to have mainstream content. There is no quick fix to this," he contended.

Sodhi also pointed out that Netflix in India was going strong with a 30% market share in terms of revenue. As per annual regulatory filings, the platform had reported revenue of Rs 1529.36 crore in FY21, which is a 66% increase over Rs 923.33 crore in FY20. It is the only platform that is closer to market leader Disney+ Hotstar which had revenues of Rs 1670.63 crore in FY21 as against Rs 1593.02 crore in the previous fiscal.

"Globally, Netflix is the biggest player with over 220 million subscribers. They have seen some corrections in subscriber numbers post Covid-19 pandemic. We need to see things in perspective. Netflix results this year could be a one-off where they see some correction after a huge jump in subscribers due to the pandemic," Sodhi averred.

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