Why Netflix Had To Cut Prices

As of December 2021, Netflix India stood at an estimated 5 million subscribers against 46 million for Disney+Hotstar and 19 million for Amazon Prime Video.

What will its price drop mean for Netflix India?

A broadening of the addressable market for its global shows, films, docu-series and its quirky Indian content and a drop of 30-40 per cent in average revenue per user.

These are among some of the insights in a research note from Media Partners Asia. Netflix, which has been the highest priced OTT since its India launch in 2016, dropped prices for its basic monthly plan from Rs 499 to Rs 199 on December 14.

"As Indians, we love great entertainment. Whatever your mood, tastes or plan, Netflix is now even more accessible," said Monika Shergill, vice-president, content, Netflix India.

"Netflix's biggest competition in India is rampant piracy and password-sharing. The revised plans leave limited incentives for customers in terms of pirating content and password sharing, in effect keeping a check on churn," says Mihir Shah, vice president, Media Partners Asia.

Put it all together and cut means that, "The competition will shift from pricing to content," says Shah. It is a point the note covers in detail.

The $25 billion streaming giant and the firm behind award-winning shows such as The Crown, Queen's Gambit and Trapped has been facing flak for its poor performance in India.

As of December 2021, Netflix India stood at an estimated 5 million subscribers against 46 million for Disney+Hotstar and 19 million for Amazon Prime Video, according to MPA data. This is a market where subscription driven video-on-demand (SVoD) is booming.

In 2021, a massive 102 million people subscribed to streaming video services, up from 56 million last year.

Though Netflix has the smallest share of paying subscribers, it has the highest share of revenues at 29 per cent of the Rs 6,000 crore (Rs 60 billion) that SvoD earned in 2021.

For long there has been a debate between analysts and the firm on why it has not managed to swing the big numbers.

"The revised plans allow Netflix to level-up with its peers on pricing. It means the service will have to go deeper, more local, and more regional in its content offering," says Shah.

"While Disney+ Hotstar has differentiated itself with sports, Amazon has done the same with movies -- Hollywood, Bollywood as well as regional cinema." Shah points out. "How successfully Netflix builds its mass content proposition to drive customer acquisition and engagement will define its future growth trajectory in India."