What’s troubling Reed Hastings about Netflix’s market in India?

Video streaming company Netflix has been finding it difficult to crack the price-sensitive Indian market even after six years of its launch in the country, Reed Hastings, Netflix Co-Founder, mentioned during the Q4 earnings conference call.

"The great news is in every single other major market, we've got the flywheel spinning. The thing that frustrates us is, why haven't we been as successful in India. But we're definitely leaning in there," Hastings said during the Q4 earnings conference call. The co-founder of the streaming platform had once said that the next 100 million users for the service would come from India.

Despite adding 8.28 million subscribers, driven mainly by the international markets, Netflix has fallen short of its subscriber target in Q4. It ended the quarter with 221.8 million subscribers worldwide.

Netflix has not left any stone unturned to succeed in the Indian market. Besides doubling down on original content investments, the platform has also experimented with subscription rates in the low ARPU market. "What's unique about India is cable is about $3 per month per household. So radically different pricing than the rest of the world, which does impact consumer expectations," Hastings noted.

In December 2021, Netflix rolled out a new pricing plan by deeply discounting its original subscription plans. The price of the Mobile plan was cut down to Rs 149 a month from the earlier tariff of Rs 199. The Basic Plan, which was priced at Rs 499 per month, has been brought down to Rs 199 a month. The Standard Plan is now priced at Rs 499 compared to Rs 649 earlier. The pricing for the Premium Plan too has been reduced to Rs 649 from Rs 799.

According to Netflix Chief Operating Officer and Chief Product Officer, Greg Peters, the company has been looking to broaden its service offering in India from different dimensions with the content being at the core of the strategy followed by distribution and payment partnerships.

"And when we looked at it, and we saw sort of the sum total of all those activities, we felt it was the right time to decrease our prices there, to increase accessibility to all of that sort of - those incremental value or features that we've been trying to deliver to the market to more Indian consumers. And we also wanted to do it not just like we did with Mobile, which is a good lower entry price point. But do it across the range of plans that we had under the theory that some of those features - like the ability to watch on TV - with a basic plan really unlocks more value in the service. And, therefore, would create more retention, more attractiveness to those plan types for the Indian consumers," Peters explained.

The company is hoping for the overall subscriber base to go up even as the ARPU continues to see a decline. "We're doing this through the lens of what's the long-term sort of revenue maximization, our best guess at that exchange. And, so in this case, we're basically anticipating that while we decrease ARM (average revenue per member), as a result of the price decrease, we're going to make it up in more subscriber adds. And I would say it's still very early in looking at India. And some of these effects, like retention, it takes a couple of months to get a very clean read on it. But the early data that we are seeing very much supports a positive read on that lens of revenue maximization through these changes," Peters added.

On being asked if Netflix would change its strategy in India, in case the strategic move to decrease prices doesn't bear fruit, Hastings said, "Now, I think it would be a long time before we adjust it materially because, in our experience in Brazil, it was brutal for the first couple of years. We thought we'd never break even. I know we've got this great business."

According to Netflix Co-Chief Executive Officer and Chief Content Officer Ted Sarandos, the company has Original content coming from all corners of the world. "The team going into producing Original content in India being pretty - almost impossible when we first started looking at it. And then this quarter alone, we've got original content coming out from Turkey. We have productions in Russia, from Argentina, Mexico, Sweden and Denmark. So, we've got Original content from all corners of the world with 20 Originals coming out of Korea this year.”

"So, the idea that they invested in this early and have built upon it, that it really is going to be something, that is going to start to - we think it will start flowering in India for all the same reasons, a good product-market fit, content people love, value that fits through their life and product they can't live without," Sarandos added on an optimistic note.