Market Insight

Netflix launches low-priced mobile only plan in India aiming to expand its subscriber’ base

July 23, 2019  | Subscribers Only


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Global OTT video service Netflix launched a low-priced, mobile-screen only plan in India in July 2019.

The plan costs Rs 199 ($2.9) per month. The plan does not include a weekly subscription option although the US company has been testing a weekly subscription option of Rs 65 ($0.94) since April 2019. 

The plan has three major limitations compared to a standard Netflix subscription in India;

  1. Only one mobile device, smartphone or tablet, can be registered per account.
  2. No HD or UHD content will be available.
  3. Several features, such as the ability to cast (or mirror) the content from a mobile device to the TV set, are restricted. 

Netflix stated in a letter to shareholders that the decision to roll-out a lower-priced mobile-screen plan will help the video service reach a wider user base in the low pay TV ARPU market.

Netflix is also working to expand the range of partnerships it has in India with telcos and pay TV operators.

Our Analysis

Netflix has high ambitions for its service in India expecting the company’s next 100 million subscribers to come from within the country. However, Netflix has so far struggled to establish a foothold in that market. The global OTT giant finished 2018 with 1.41 million subscribers in India, less than half the number of subscribers to the market leader, Hotstar. Disney-owned Hotstar recorded 2.96 million paying subscribers to its online subscription video service in India by the end of 2018.

India presents a key growth opportunity for both local and global video players as connected media devices are being rapidly adopted within the country. India is the second largest smartphone market globally, after China, with nearly half a billion active smartphones at end of 2018. According to IHS Markit Consumer Research: Devices, Media & Usage surveys, four per cent of Indian smartphone households did not have access to any other Internet connectable media device in 2018 making it the only device capable of receiving OTT video services such as Netflix. Although a relatively small percentage rate, this equates to nearly 4 million smartphone households. Of these smartphone households, nearly 90% are already engaging with video content via the device, although less than half have subscribe to a video service. Price will be a key factor in the success of Netflix’s mobile only plan as just 21% of smartphone households have income in line customers already subscribed to a Netflix package in India.

Netflix entered the Indian market in January 2016 and benefitted significantly, like every other OTT service in the country, from the launch of Reliance Jio’s 4G mobile broadband service in September 2016 as well as the 75% reduction of access prices. Despite these benefits, Netflix faced several challenges which impacted the growth of its business in India. Netflix only permitted international credit cards to be used to pay for its service at launch. However, 90% of credit and 99% of debit transactions in India were executed using domestic cards like RuPay. It took Netflix 20 months to solve the issue and permit domestic card payments including RuPay.

Partnerships with local telcos for Direct-Carrier-Billing (DCB) is a key strategy for OTT services to accelerate adoption of their service. DCB partnerships allow OTT services to focus on their content offers whilst the telcos take responsibility for matters such as subscriber’ acquisition costs, billing, marketing & promotion costs. Vodafone was first to offer free Netflix access to its post-paid customers in India, ranging from three-to-twelve months.  In August 2018, Netflix partnered with Bharti Airtel to provide three months free access to the OTT video service for Airtel’s Postpaid and V-Fiber Home customers with full billing integration. The move by Bharti Airtel saw the carrier’s penetration amongst Netflix users increase nearly 20 per cent between November 2018 and April 2019. Netflix is offered as an app via the boxes of satellite operator Airtel TV and of cable operator Hathway.

Localisation of content is also a proven growth accelerant for international OTT services. More than 75 per cent of English-language speaking Indian internet users state local content is important to them in a video service, higher than any other country, according IHS Markit surveys conducted in April 2019. Content produced in India also has global appeal and Netflix has expressed its commitment to invest in producing original content in the country to feed its domestic and foreign audience. By the end of June 2019, 31 original content productions have been announced for India, comprising mostly movies and TV series. IHS Markit estimates, Netflix invests between $75-$90 million a year for original productions in India.

The biggest challenge for Netflix to overcome in India is pricing. India is a price-sensitive market which must be addressed by not just Netflix, but every OTT service entering this market. Amazon Prime Video’s price strategy in India is receiving a positive reception from its consumer base: The cost of an annual subscription to Amazon Prime Video is just $15, equivalent to the cost of a two-month subscription for Netflix’s introductory package. By comparison, pay TV in India is also cheaper than Netflix as the average pay TV ARPU in the country is between $4 and $5 a month, while Netflix’s introductory package costs $6.94.

Netflix has long resisted price matching its service to competitors in India. Netflix’s relatively lower-priced mobile-screen only plan is a step in this direction. The step will likely result in significant growth in Netflix’s subscriber’ base in India but provide little benefit in terms of revenue due to the less expensive price of service. Netflix is targeting a very high number of subscribers in India and as such this strategy may still not be enough in the long-term. Investment in content catering to several of India’s regional languages, combined with a less expensive price of service will likely yield not only a significant boost in subscriptions, but also in revenue and loyalty to the service.   

 

Geography
India
Research by Market
Media & Advertising
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