India, with its teeming millions of mobile data-rich, smartphone-equipped content guzzlers, is rapidly forcing online entertainment platforms to cut down pricing in what is already one of the world’s cheapest markets. No surprise then that Netflix has revealed the impending roll out of a mobile-only subscription plan likely to cost as little as Rs 250 per month.
“After several months of testing, we’ve decided to roll out a lower-priced mobile-screen plan in India to complement our existing plans. We believe this plan, which will launch in Q3, will be an effective way to introduce a larger number of people in India to Netflix and to further expand our business,” the company noted in a letter to its shareholders. The news comes amidst statements from executives that they see India as a crucial growth market.
“We’ve been seeing nice steady increases in engagement with our Indian viewers that we think we can keep building on. Growth in that country is a marathon, so we’re in it for the long haul,” said chief content officer Ted Sarandos said. Experts say the new plan is likely to be vital for the company’s subscription drive in the country, since its current plans are priced much higher than other competitors.
Netflix offers plans between Rs 500 and Rs 800 per month currently, while market leader Hotstar’s is just Rs 299 per month and Amazon bundles its video offerings along with its Prime membership plan at Rs 1,000 per year. Other home-grown rivals like Zee5, ALTBalaji and SunNXT also offer much cheaper plans. The company’s chief product officer Gregory K Peters elaborated on the rationale for the move in an analyst’s call this week, pointing out that a “lower price offering would improve accessibility in a market where the typical pay-TV package is under $5”.
While, over the top (OTT) platforms are steadily tuning their pricing models to appear more attractive , the impact of such low pricing on profit margins is a concern. But, this doesn’t seem to be acting as a deterrent. “India is a young country and OTT video market is a very competitive space in India at present. Platforms are focusing on price innovation, content creation and acquisition, and partnerships as the engine for growth.
The low cost of mobile data and affordable smartphones have revolutionised overall video content consumption in India. However, OTT platforms have struggled to register profits, creating an environment ripe for acquisitions or exits. Having said that, new players continue to enter the market as it is expected to record double-digit growth from subscription revenues during the next five years,” said Hanish Bhatia, senior analyst, Counterpoint Research, earlier this month.
The allure that India holds for these platforms, despite the absence of profitability, is unsurprising. According to the Boston Consulting Group, India’s video-on-demand market is estimated to zoom to $5 billion by 2023 from just $500 million last year. But, India’s users are likely to be less willing to subscribe, preferring to consumer ads for cheaper, or even free, access to content.
For Netflix, tapping into this growing base of users is crucial to maintaining its hold on the world market. With China virtually out of the game, with most streaming services banned currently, India is seen as the only major growth avenue at a time when user subscriptions are slowing down in the western markets. During the second quarter of 2019, Netflix’s paid membership growth has halved year-on-year to just 2.7 million, far below its target of 5 million. According to the company, it now aims to add 7 million users during the current quarter, with around 6.2 million of these expected to come from international markets including India.
COST CONSCIOUS MARKET
India’s OTT streaming market has one of the cheapest content pricing in the world. Netflix offers plans between H500 and H800 per month currently, while market leader Hotstar offers a H299 per month package.
Meanwhile, Amazon bundles its video offerings in India along with its Prime membership plan at G1,000 per year. Other indian rivals like Zee5, ALTBalaji and SunNXT also offer much cheaper plans than Netflix currently