Top 5 simple reasons for Netflix’s inability to crack the Indian OTT market

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Netflix is faltering at one of its biggest challenges so far – cracking the Indian market. Their inability to decipher the Indian market has not been surprising to me. They have tried every card in the game but unfortunately, they have missed riding the wave consistently. It has been like the party going kid who arrives at the party scene after the major fun is over.

Netflix versus the other OTT giants in India
Netflix versus the other OTT giants in India
  • There are 75 different streaming services in India that provide viewable content.
  • The major OTT (Over The Top) players in the Indian market are – Disney Hotstar Plus, Amazon Prime Video, Netflix, SonyLIV, Alt Balaji, Zee5 and Eros Now
  • The market is one of the fastest-growing among all digital sectors with projections of $13-15 Bn by 2030 at a CAGR of 22-25%.
  • About 7-8 crore people (70-80 million) are subscribers who pay for the services.

The news is awash with articles and reviews of why Reed Hastings, the CEO of Netflix has lamented on the OTT player’s inability to crack the Indian market. 2016 was when Netflix entered the Indian market. The CEO had claimed in 2018 that the company’s next 10 crore customers will come from the Indian market.

Three years later, Netflix has struggled and managed to add only 55 lakh paid customers in India. This is despite the Indian OTT market growing at breakneck speeds, mobile Internet being the cheapest across the world and a largely untapped, demographically young market.

A point will come when the huge consumer base with a particular OTT will force it to pay any amount to procure content from other platforms. Other OTT platforms will find it cheaper to sell content to the big guy in the room rather than use the content to attract new consumers. This shift will happen somewhere in the next 3-4 years. OTT market is currently in the same state as the Indian telecom market was 5 years ago

My take on the OTT market

Localised content is the way to go

Consumers love video content. However, they love content they can consume readily even more. The success of a set of English movies over the last few years when they were simultaneously released with Tamil and Telugu dubbed versions along with the original English versions are testimony to this. This effort was an attempt to bring the characters on the screen closer to the viewer.

A country like India comes with unique challenges. It has sizeable populations speaking different languages. Each state has a population that makes it a lucrative market. Just like Europe, Indian states are a diverse set of regions with populations exceeding most European countries. That is sweet news for a lot of companies.

Of late, this realization has sunk into the Indian movie industry too especially the South Indian movie world. Movies are being produced not just for the home language by directors but are being dubbed and released simultaneously in 3-4 other Indian languages too. Bahubali, KGF and now Pushpa have all broken into the 100 crores plus club in terms of box office collections, which is proof enough that fans love viewing good films in their own language.

OTTs too need to embrace this trend fully to succeed in the Indian market. Every movie on Netflix or a Disney Hotstar must be available in multiple languages to appeal to the local audience.

Consumer wants multiple entertainment formats on the same OTT platform

Each OTT also has tried a different route to understand and appeal to the psyche of the Indian consumer. Amazon Prime has combined its OTT offering with the benefits of online shopping. Netflix has touted its huge collection of movies as a crowd puller. Disney Hotstar has combined sports with regular entertainment on its OTT app.

Disney Hotstar has tasted the most success among the three big players.

The point here is that the consumer also is looking for variety on a single platform. Switching platforms for different forms of viewable content is a pain.

More bang for the buck

The Indian consumer is also a price-sensitive consumer. She/He has an innate sense of what is the upper range one can pay for the convenience provided by OTT apps. There are also certain characteristics of the consumer that come from a cultural mindset.

Indian consumers love to share. They will share their OTT platform username and password with family and friends. They will not consider it cheating. This has prompted OTT platforms to bring in restrictions like the number of screens where the content is being streamed simultaneously. However, such restrictions can be counterproductive to the point that consumers shun your platform as Netflix experienced it.

Consumers also want more in a single bouquet. The problem though is that the content is fragmented and there is some content with all the major players that entice the viewers. However, this will not last for long. A point will come when the huge consumer base with a particular OTT will force it to pay any amount to procure content from other platforms. Other OTT platforms will find it cheaper to sell content to the big guy in the room rather than use the content to attract new consumers. This shift will happen somewhere in the next 3-4 years. OTT market is currently in the same state as the Indian telecom market was 5 years ago

Shifting OTT platforms is a pain. However, right now the consumer is also a floating entity. They migrate to the platform of choice depending on the flavour of the month. This will change as 1-2 platforms emerge as the strongest.

Gather subscribers first, decide to monetize later

The final point to be noted is the need to first get the customers as was true of the Telecom market. Once you start losing customers, you will be squeezed on the money front. That will prevent you from making additional investments. No new investments translate to no new features and hence losing more customers. It is a continuous downward spiral. Look at how BSNL in the telecom sector lost its customers. The same was true for Vodafone and Idea.

Netflix is divided between getting customers and making money. They charge one of the highest fees among comparable OTTs in the American and European markets (close to 12-14 USD per month per customer). That is about 1000 Indian rupees.

In India on the other hand, they are being forced to revise their rates downward. They reduced it twice over the last 6 years and their basic mobile-only plan is now Rs 200 per customer per month.

Netflix is divided between getting customers and making money. They charge one of the highest fees among comparable OTTs in the American and European markets (close to 12-14 USD per month per customer). That is about 1000 Indian rupees.

In India on the other hand, they are being forced to revise their rates downward. They reduced it twice over the last 6 years and their basic mobile-only plan is now Rs 200 per customer per month.

Hopefully, it is not too late for them. They seem to have learnt the lesson after being in the Indian market for 6 years. That is a pretty long time in business.

The perception problem

The long wait for non-urban customers to start looking at Netflix as an affordable OTT has put doubt in the customer’s mind that Netflix is for the well to do and the urban class. This associated with its largely western content dissuades most non-urban Indians from even giving it a try.

Disney on the other hand had a good perception with Indian customers for several decades and their association with Star makes them all the more appealing.

Amazon too became a household name due to its intense rivalry with homegrown Flipkart for a share in the Indian online shopping space.

Comparision of the top 4 OTT platforms in India

Amazon has bundled a lot of value along with the OTT platform. It even owns the FireTV module that enables streaming content on television.

Hotstar has a lot of regional content in terms of soaps and serials that are a staple of a lot of Indian households. That combined with sports and kids content clicks with Indians.

Zee5 has a huge collection of local movies under its thumb. This combined with an equally large collection of soaps and serials put it alongside Hotstar in terms of Indian content.

Netflix has world-class content but is primarily oriented to the English speaking urban populace. This puts it at a disadvantage.

Final words

Netflix has to first get into the hearts of Indian customers’ before they can expect to make any money in the Indian market. They have only managed to invade the mind space and that is not sufficient in a high stakes market like India where you are jostling with other OTT giants like Amazon, Disney Hotstar and home turf players like Zee5.

Additional Reading

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