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Netflix's lack of success in India has been 'frustrating': cofounder Reed Hastings

The company will expand its portfolio of games across both casual and core genres in 2022 as it seeks to attract and retain paying customers.

January 21, 2022 / 02:27 PM IST

Netflix, the streaming entertainment giant, added 2.58 million paid members in the Asia Pacific region in the fourth quarter of 2021, clocking its best subscriber gains in over a year, driven by strong growth in India and Japan.

To be sure, Asia is the smallest region for the company, trailing North America, Latin America and Europe. The region’s 32.6 million subscribers account for 14.7 percent of the service’s overall 221.84 million members.

However, the region is becoming increasingly important as Los Gatos, California-based Netflix relies more on global markets for growth. Asia has been one of the largest contributors to the service’s user additions in recent quarters, driven by successes in South Korea and Japan.

India has been a tricky market to crack as the service seeks to gain a foothold in the country amid intense competition.

“In every single other major market, we’ve got the flywheel spinning,” Netflix cofounder Reed Hastings said on an earnings conference call on January 20. “The thing that frustrates us is why haven’t we been as successful in India. But we’re definitely leaning in there.”

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Price drop

Netflix reduced its India pricing in December for the first time since its entry in 2016, with the biggest drop in the entry-level plan, now available at Rs 199 per month compared with Rs 499 per month previously.

The company has taken steps including the introduction of a mobile-only plan and piloting various pricing experiments in the country over the past couple of years to make its offerings more attractive to potential customers.

“What’s unique about India is cable,” Hastings said. “It is about $3 (Rs 223) per month per household, which is radically different pricing than the rest of the world, which does impact consumer expectations.”

During the earnings conference call, Netflix COO Greg Peters said it was the right time to decrease prices in India as they took stock of their activities to broaden their offerings.

“We also wanted to do it across the range of plans that we had under the theory that some of those features like the ability to watch on TV with a basic plan really unlocks more value in the service and therefore, would create more retention, more attractiveness,” Peters said. “While we decrease ARM, (average revenue per member) as a result of the price decreases, we’re going to make it up in more subscriber adds (additions).”

Peters noted that it is still very early days and “some of these effects, like retention, take a couple of months to get a very clean read on it.”

Netflix Group CFO Spencer Neumann said every country is on a different adoption curve and even though everyone loves films, television and games, entertainment is still fundamentally pretty local around the world.

While the company doesn’t offer a country-wise breakup of members, a recent report by independent research and consulting firm Media Partners Asia projected the service’s subscriber base at 5.5 million at the end of 2021.

The firm noted that while Netflix has only 5 percent of the total streaming service subscribers in India, it leads in terms of subscription video-on-demand (SVoD) revenue with a 29 percent share. India has about 102 million SVoD subscribers, which is expected to grow to 224 million by 2026, MPA said.

India Video Streaming market

Slow start

Netflix added 8.3 million members during the fourth quarter in what was otherwise a slow growth year for the company. Net annual member additions dropped to 18.2 million in 2021, which is 50 percent lower than the record 37 million added in 2020.

The company projected a slow start to 2022, expecting to add 2.5 million subscribers in Q1 2022, citing delays in key titles such as the second season of Bridgerton and the upcoming science fiction movie The Adam Project, both expected to debut in March.

While retention and engagement remain healthy, acquisition growth has not yet re-accelerated to pre-Covid levels.

“This may be due to several factors including the ongoing Covid overhang and macro-economic hardship in several parts of the world like Latin America,” the company said in a letter to shareholders.

Gaming entry

Netflix is also doubling down on its recent gaming foray. The company said it will expand its portfolio of games across both casual and core gaming genres in 2022.

Peters said it is open to licensing large game IPs (intellectual properties) that people will recognise.

“I think you’ll see some of that happen over the year to come,” he said.

The company is building an internal development capacity for its own game studio, which Peters termed as “a huge long-term multi-year opportunity.”

To accelerate this process, the streaming giant acquired its first games studio in September with the purchase of Night School Studio, a game developer best known for the supernatural mystery graphic adventure Oxenfree.

Peters said this will help them deliver interactive experiences “that are tied to the IP that we’re excited about, that are timed with that. This is when you’re going to see a next level of unlock around the value we can deliver to members.”

“We’re going to be experimental and try a bunch of things. But the eyes that we have on the long-term prize centre more around our ability to create properties that are connected to the universes, the characters, the stories that we’re building in other places and magnify that value for the fans of those stories,” he said.

Since its launch on Android and iOS in November, Netflix has published 10 mobile games. All these games are Netflix exclusives, although each of them has to be separately downloaded. They are offered to Netflix members on an ad-free model with no in-app purchases or any additional fee.
Vikas SN
first published: Jan 21, 2022 02:27 pm
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