Last week, Netflix officially announced its entry into India and 130 other markets in Asia, West Asia, and Europe. In India, their basket includes Hollywood movies, television shows from other studios and broadcasters, apart from original TV shows and Indian content. Netflix will compete with digital plays like Hotstar, Hooq, Hungama, and Eros Now, as well as broadcasters and studios with their own OTT (over the top) play.
Gaurav Gandhi, COO, Viacom18 Digital Ventures, which plans to launch a VOD (video on demand) service, VOOT, later this year, could have been speaking for the industry when he told The Hindu , “Netflix will play the role of a ‘category expander’ for the online video market: they are the only subscription-based VOD service with the kind of content they have. The price spectrum and the niche content it has will open a new online video market in India.”
Michael Smith, CTO, Hooq, which is in direct competition with Netflix in India, echoed this: “This launch has been anticipated and should accelerate the expansion of the nascent OTT market in Asia.” Before it can expand the market, Netflix must make an impact that lasts beyond the free one-month subscription it offers. At the moment, Netflix India has only 629 titles compared to 4,830 in the US. Missing: cult classics like Friends and shows like House of Cards which premiered in Netflix in the US.
Hungama CEO Siddhartha Roy says, “Pricing and availability of regional content is the key.” Hungama Play has access to over 7,500 movies, of which over 6,000 are Bollywood and regional Indian cinema. The firm plans to venture into original content in third quarter of this year and unveil TV content on the service in 2016.
Jyoti Deshpande, Group CEO, Eros International, says, “Hollywood films only account for 8-11 per cent of the total box office in India. An Indian player will be at the forefront in India.” The company has used its Bollywood connections to make ‘cool edgy originals’ and movies that will premiere on ErosNow, its OTT platform, she said.
It might be too early to dismiss Netflix on this count, Mr Gandhi points out. “They would be working through their plans to tailor the India strategy in months to come.” Netflix, too, is not overly concerned. A Netflix spokesperson told The Hindu , “After we launch in a given market, we will almost immediately add more content to the service and in most markets the size of the catalogue will double in the first year.”
He said in 2016, the company plans to spend about $5 billion on programming rights, including many titles that will be exclusive to Netflix around the world, which includes more than 30 new Netflix original series or seasons of existing series. Most of these will be exclusively available to its members. In addition, the company is launching more than 10 films on Netflix in 2016, adding more children’s programming and documentaries to the mix.
Pricing and slow broadband speeds, however, are a concern. In comparison to local offerings — ErosNow is Rs 60 per month, HOOQ at Rs 199, for example — Netflix’s entry price is at Rs 500 a month. And the consumer will need to pay her ISP (internet service provider) separately for data consumption. Most online streaming players in India offer some content free, with a monthly subscription for premium content; advertising brings in the rest of the revenue.
“We believe it is a compelling offer and those interested in checking out the service can sign up for a free trial at Netflix.com and cancel at any time. We try to keep prices around the world fairly consistent,” said the Netflix spokesperson.
However, Mr Gandhi believes Netflix doesn’t have a specific advantage. The US cable TV Average Revenue Per User (ARPU) is around $80-100 while Netflix’s subscription rates are in the $8-10 range. “That is a huge price arbitrage advantage that Netflix and other OTT operators have in the US,” he says. At $4-5, the Indian cable TV market has one of the lowest ARPUs in the world. Mr Gandhi says, “Netflix’s basic subscription plan is virtually double. Even if one takes in the premium HD packs of DTH and cable companies, they would at best be on par with the Netflix entry price. So there is not really any price advantage or arbitrage when it comes to comparison with cable or DTH. Seen in context of high telco data costs, it becomes another challenge.” Mr Roy concurs: “In India, a cable connection costs anywhere between Rs 150 and Rs 250. Also international content accounts for just 5 per cent of content.”
Not everyone believes the price is a turn-off. “Taking into consideration that subscription is Netflix’s fundamental revenue stream and that it’s here to stay, besides the content it offers, it’s not a bad price at all,” says Karthik Srinivasan, head of content at media planning agency GroupM, adding that a typical Indian couple would anyway spend Rs 500-800 on a movie. “The barrier to entry in India is not money, it never was,” says Ms Deshpande. “It is content, brand, pricing, marketing, and appeal of Hollywood versus Bollywood.”
For Rs 100 per month, a premium subscriber with Eros Now can also download the content and watch it offline. Ms Deshpande of Eros Now says, “We believe this will be a game-changing feature. It works around the streaming quality and buffering due to broadband speeds.” HOOQ also has a download feature. “We allow users to manage the quality of the stream thus saving on bandwidth and allowing them to easily stream on low bandwidth,” says Mr Smith.
OTT growth in India is primarily on the mobile. 4G services seem to be the key for Netflix. India’ 4G subscriber base may explode, from the current 90m to around 400m in the next few years, a huge market for video streaming companies, according to Religare Institutional Research data. Netflix’s spokesperson said, “The service automatically adapts the data rate of the video stream to meet the bandwidth available to the member. The minimum required broadband connection speed for standard definition is 0.5 Megabits per second.” Asked if the company was considering a tie-up with a local telecommunications partner, he declined to comment.
Another hurdle for Netflix is weaning Indians away from illegal downloads. Mr Srinivasan of GroupM says that isn’t worrisome. “Torrents exist in the US too. Netflix’s entry is not a short-term stoppage to these.” What counts, he says, is, “Netflix will give filmmakers a legitimate platform to monetise films post the theatrical release, as an alternative to DTH. Since this will have a longer shelf life, it is important to a content creator.”
For now, consumers are looking forward to its India presence. Rohit Bhatiani, director, Deloitte in India, says, “Any new business model will take some time to get established. The good thing is, with a lot of foreign brands, there is already awareness among young people who always wanted to try it out. It can definitely make an impact.”
(With inputs from Yuthika Bhargava in New Delhi)
