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Netflix may change pricing structure to attract new subscribers in India

Netflix has acknowledged that it is “way behind YouTube and Hotstar” in India and will address different demographic segments one by one

July 18, 2018 / 03:18 PM IST

Over-the-top video service giant Netflix may change its pricing structure to attract new subscribers and while addressing audience in different demographic segments one after another.

In an earnings call following the announcement of its Q2 results, Netflix co-founder and Chief Executive Officer (CEO) Wilmot Reed Hastings acknowledged that the company is “way behind YouTube and Hotstar” in India.

“So Netflix is having great success getting established (in India), getting a reputation going. And with this triplet of Lust Stories, Sacred Games and Ghoul, we are really getting some nice momentum in our India growth,” Hastings said.

Hastings added that Netflix is still “a niche product” and has “a long way to go to expand languages and many other aspects” to be able to become a broad Indian product.

Netflix’s Chief Product Officer (CPO) Gregory Peters said the company is “far from reaching a limit in terms of the addressable market given the pricing structures” it has currently deployed.

“We got a lot of room to grow in a reasonably affluent part of the society in India and other markets around the world, so much more runway,” Peters said.

Peters, however, said Netflix is constantly testing its pricing models and what pricing strategies work best for its subscribers.

Netflix’s Chief Content Officer (CCO) Ted Sarandos said, “The price point is mostly relevant to the value proposition, our Indian consumers finding a lot to watch on Netflix, having a great time doing it."

So, the price point becomes a value proposition over a premium proposition, Sarandos added.

Star India-owned Hotstar, Netflix’s rival in India, has a mixed subscription structure where it charges its users for premium content.

Moving into different demographic segments

Netflix CFO David Wells said Netflix has different growth patterns in different demographic segments and it addresses one segment before moving to another.

“We may have an issue where there is three or four different sorts of growth patterns within India in terms of different demographics, different segmented groups as we address one segment and then we start addressing another and so forth, and so forth,” Wells said.

Wells added that each segment has specific challenges and the company is in the “early days of sort of that first segment. So expect more from us in terms of getting into segments two, three and four.”

Shares plunge after disappointing subscriber numbers

On Monday, Netflix’s shares dived more than 14 percent in after-market trade after the company reported disappointing subscriber growth numbers.

The OTT platform declared it had added 5.2 million subscribers in the quarter ending June, equal to what it had added during the same period last year. The service had forecast growth of 6.2 million subscribers.

The company also reported its revenue at $3.91 billion against $3.94 billion estimated, according to a Thomson Reuters consensus estimate.

Indian content

In a letter to shareholders, Netflix said Lust Stories, a new Indian original film, “has been a major success as our largest watched original in percentage terms in any individual market in its first month”.

Sacred Games, Netflix’s first Indian original series, launched earlier this month “is off to a similarly strong start", the company said.

OTT video streaming has seen a 35 percent year-over-year increase in the market, valued at $280 million with nearly 100 million subscribers, according to a report by Counterpoint Research in December 2017.

Hotstar dominated the market with 75 million subscribers, followed by Viacom 18’s Voot (15 million), Amazon Prime Video (11 million), Sony LIV (5 million) and Netflix (5 million), the report suggested.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Nachiket Deuskar
first published: Jul 18, 2018 03:18 pm