📺 Netflix's India Problem

Why aren't more Indians Netflix and Chilling?

If you're someone who is "sharing" a Netflix account (read: using someone else's password to get free access), you may be the reason behind Netflix's CEO's sleepless nights.

The multibillion-dollar company saw $49.1 billion wiped off its market value on Friday as its shares fell around 21.8% after its earnings report came out. 

This was despite the fact that the company saw a 16% increase in revenue.

The reason why the shares tanked?

The company's Q4 earnings report showed that only 8.28 million new subscribers binged on Netflix content in the last quarter as compared to 8.5 million subscribers in Q4 2020. Plus, the company also projected that it would add 2.5 million subscribers in Q1 of 2022, as compared to the 3.98 million it added in Q1 2021. 

And while the slowdown in subscriber growth is a problem that it is facing in many markets, Netflix co-founder and CEO Reed Hastings finds the lack of growth in India particularly "frustrating." 

So, why is the global OTT giant not being able to crack the Indian markets?

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Netflix Can No Longer Chill

Thanks to the memefest on social media, it may seem like everybody watched Squid Game this year. But Netflix witnessed its slowest growth in subscribers since 2015.

While people are still binge-watching, there's a lot more content to binge on now. Netflix is facing increasingly tough competition from other OTT platforms like Apple TV+, HBO Max, Amazon Prime and Disney+. These services, and many more that are cropping up every single day, are diluting Netflix's market share.

Especially Disney+ which has left no stones unturned since last year to get more subscribers, giving fans back-to-back Marvel content that they had been craving since Avengers: Endgame. All in all, it now has managed to amass 179 million subscribers, giving a tough competition to Netflix's 220 million. 

So much for mocking Disney for growing “inorganically”. Who’s laughing now?

But competition isn’t the only reason. Economic instability in many countries, especially in the Latin American nations has directly impacted subscriber growth.

Even then, Netflix doesn't seem very worried about these other markets. In fact, in the US and Canada, it is even raising subscription prices not thinking about how this could potentially put off subscribers.

It is specifically worried about India…

Netflix's India Problem

Have you ever had that one problem in your entire test paper that you couldn't solve? Just one? Didn't that drive you crazy?

Well, India is that one problem for Netflix.

You see, in the last few years as Netflix has been expanding to the so-called emerging markets, it has seen nothing but success.

It may have taken the company some time, but eventually, it managed to figure out the tastes of difficult markets like Brazil and Japan as well.

But India turned out to be a different beast altogether.

As the company's CEO Reed Hastings said in a post-earnings call:

And that's a fair point, cable is cheaper in India than in most countries. And in some cases, you can even bundle up your cable and WiFi costs together. So, this is often a more economical option for many. 

But it's not just cable costs that are driving down Netflix subscriptions. Over 55% of people in India prefer watching content on OTT platforms. And other OTT platforms in India are also much cheaper than Netflix.

It doesn’t just end here. Those OTT platforms are fully aware of India’s love with freebies and extra benefits. They are using this to the best of their advantage. An Amazon Prime subscription gives you Prime shopping benefits like fast and free deliveries. Meanwhile, a subscription to Disney+ Hotstar or Sony Liv allows you to watch live cricket or football matches. 

Thus, to solve this issue (and to turn jugaadu password sharers into subscribers) Netflix has reduced its subscription prices in India by around 18%-60%! 

Yes, while it is increasing prices in other countries, it is decreasing prices here. Turns out we Indians are so good at bargaining that we don't even have to actively bargain anymore. 

So, will this solve Netflix's problem? 

Well, hardly. 

You see, more and more subscription services are coming up every day in the country. India currently has over 60+ OTT services, many of which cater to a niche audience. For instance, HoiChoi, an Indian subscription service, caters specifically to Bengali viewers. These services are diluting Netflix's market share. 

But ReadOn how much impact can these small-time services have on Netflix's market share?

A major impact. You see, around 65% of India's OTT consumption comes from rural areas, where people prefer more regional content. So, even though 'Squid Game' is making money or 'The Crown' is winning awards, people from these areas will prefer services that offer them shows in their language. And these seemingly small services are beating the global giant by catering to this demand.

But Netflix has now understood that Indians need desi content. And it is doubling down on exactly that, with some originals already in the pipeline.

On a global basis also Netflix is working on acquiring and producing better content, so it can stand out among the OTT crowd. Taking a cue from Squid Game's success it has acquired 20 more Korean dramas.

But will these tactics be enough to make us all binge on Netflix again? Or will the giant fade out and become just another OTT in the crowd?

P.S. You can read the transcript of the entire post-earnings call here.

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