Netflix's co-CEO Ted Sarandos sees India as a 'big prize'

Netflix co-CEO Ted Sarandos

Netflix co-CEO Ted Sarandos said that India is a "big prize" because it has an enormous population of entertainment-loving people and they will "ultimately do great" in the country.

Sarandos made these remarks during the company's post-earnings interview on April 18, at a time when the company is increasingly relying on emerging markets such as India for its future growth.

While Netflix doesn't provide a country-wise subscriber breakdown, the Asia Pacific region has remained one of its biggest sources of new paid member additions in recent quarters, as mature markets such as the United States and Europe witness slowing subscriber growth.

In Q1 2023, Netflix added 1.46 million paid members in the Asia Pacific region, bringing its total subscriber base to 39.5 million. This represented nearly 83.5 percent of the company's total 1.75 million subscriber additions in the quarter. Netflix's global subscriber base stood at 232.5 million for the quarter.

While India has served as a key content hub for Netflix in the past few years and the appetite for digital content is rising in the country, its price-sensitive nature has made it particularly hard for the streaming service to gain a significant foothold in the market where most of its rivals are offering their services for lower prices.

Read: Netflix to refine its pricing strategy after India price cuts boost engagement

In January 2022, Netflix co-founder Reed Hastings said that the service's lack of success in India has been "frustrating".

Over the years, Netflix has taken several steps including the introduction of a mobile-only plan and piloting various pricing experiments in the country to make its offerings more attractive to potential customers. Netflix also reduced the prices of its service in India by 20-60 percent in December 2021.

During the earnings interview, Sarandos said these measures are helping them make some headway into the country. The price reductions, along with an improved content slate, have helped grow engagement in India by nearly 30 percent year-on-year, while revenue growth increased to 24 percent in 2022 versus 19 percent in 2021, the company mentioned in a shareholder letter.

"When we get the pricing a little better and more suited to the market, you can see that we can grow revenue and engagement. We have to get the content that people just really flip out for. We have seen a steady improvement in that quarter-over-quarter, both in our films and our series," Sarandos said.

"We also have got to have the product that they love and that you can do business with them together. We are getting the pricing better and there’s always lots of promise to continue to grow in India," he added.

That said, Sarandos mentioned that India is a unique market, since people like local content that is finding increasing resonance in the global markets.

He cited SS Rajamouli's magnum opus RRR, which recently made history by becoming the first Indian film to win an Oscar for best original song, as well as Sanjay Leela Bansali's Gangubai Kathiawadi, which was also nominated for an Oscar earlier this year.

Read: Darlings, Jamtara, RRR: What India watched on Netflix in 2022

"As the content opportunity continues to scale and our ability to access the market and thrill those audiences continues to grow, we can do quite well in India," he said.

However, Sarandos noted that they are still a long way from that, and that they are still investing in these opportunities. Netflix competes in India with a slew of domestic and international rivals, including Disney+ Hotstar, Amazon Prime Video, Zee5, Sony LIV, and Jio Cinema.

India's subscription video-on-demand (SVoD) market clocked revenues of $1.2 billion for the year 2022, up from $0.8 billion in 2021, according to a recent report by Deloitte. The market is expected to grow by 19 percent CAGR (compound annual growth rate) to touch $2.9 billion in revenues by the year 2027, it said.