Obtain a copy of Netflix, Inc.’s annual report. Four years ago, CEO Reed Hastings anticipated that India will be the source of the company’s next 100 million customers. However, this has not been the case.
Both Netflix and its rival, Disney, have struggled to gain traction in the world’s second most populous country.
“The good news is that we’ve got the flywheel in motion in every other significant market.” What perplexes us is why we haven’t had as much success in India. On a recent earnings call, Hastings stated, “But we’re obviously heading in that route.”
Pricing has played a significant role in the failures. A good show is appreciated by Indians. However, they’ve never had to pay nearly as much as a Netflix membership plan, which starts at roughly $8 per month.
“What makes India special is that cable costs roughly $3 per month per family. So, significantly different pricing from the rest of the globe, which has an effect on customer expectations,” Hastings stated.
In India, a monthly subscription to a linear cable TV or pay TV package with more than 100 television channels costs an average of $1.73.
Netflix substantially slashed its expenditures in India in December, which comes as no surprise. In India, the most basic service costs $2.65 per month, while the most expensive premium option costs little over $8. The entertainment behemoth’s mobile-only viewing bundle has an even cheaper monthly subscription fee of $2.
“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,” Netflix Chief Operating Officer and Chief Product Officer Greg Peters said last month, following the company’s fourth-quarter earnings report.
“And, once again, we’re looking at it from the prism of long-term revenue maximization… And so, in this situation, we’re anticipating that, while we’ll have lower average revenue per member as a result of the price cuts, we’ll make up for it with more subscriber increases “Peters said.
Preliminary evidence following the launch of these new price tiers, according to Netflix, confirms their assumption of revenue maximisation through higher member numbers.
Netflix posted better-than-expected fourth-quarter results in January, but said it expects weak subscriber growth in the first three months of the year owing to “Covid overhang” in key overseas markets.
The price cut also comes at a time when Netflix, despite operating in India for six years, has been unable to penetrate into the Indian user market. According to third-party data provided by research firm Media Partners Asia, the country’s overall paid subscriber base is a pathetic 5.5 million.
Netflix’s subscriber base is not broken down by country.