Netflix co-founder, president, and co-CEO Reed Hastings recently indicated on a conference call with investors that the business’s lack of success in India is “frustrating,” but that the company is “definitely pushing in there.”
After announcing that it expects to add only 2.5 million new news subscribers in the current quarter, the lowest for the first quarter in nearly a decade, the Los Gatos-based company saw its stock plummet. The company added 2.6 million new paying subscribers in the Asia Pacific region in the last quarter, up from 2 million in the same quarter last fiscal, with robust growth in both Japan and India.
In December, Netflix dropped its fees in India to make the service more affordable to a wider spectrum of subscribers. Many analysts, however, believe that the move will just increase the number of customers currently utilizing the site due to account sharing.
Netflix’s chief operating and product officer, Greg Peters, said the price shift is the result of a series of initiatives the business has made in India over the years during a webcast on Thursday. While the price decreases are likely to result in a decrease in average revenue per member, Netflix expects to make up for it by gaining more customers.
“We’ve been operating there and learning more about Indian clients’ tastes, etc.,” Peters explained, “and that’s broadening the service offering across multiple dimensions.” We decided it was the perfect time to lower our prices there, to make it more accessible to everyone, and we’re doing it from the perspective of long-term revenue maximization.”
“I think it’s still too early to think about India.” And some of these impacts, such as retention, take a few months to obtain a clear picture of,” he said. “However, the early data we’re seeing strongly suggests that the lens of revenue maximization through these modifications is a positive read.”
Hastings previously noted that India’s pay-TV pricing is exceptional, at around $3 per month per family. “Rarely different price from the rest of the world, which affects consumer expectations,” he said. After two years, Netflix, the first global OTT service to launch in India in 2016, started employing and investing in original content. Hastings said in 2018 that it would invest Rs. 2,000 crore on content in India over the next two years, more than the top four Hindi general entertainment networks’ total programming budgets. Many of the series and films, on the other hand, have yet to draw huge audiences.
On the investor call, Netflix Group CFO Spencer Neumann said that while the company has a “great business” and a “great business model” that scales well, it is also exceedingly tough in every nation.
“Every country has a different adoption curve, and we talk about product-market fit, but even if everyone enjoys movies, television, and games, it’s a specialized situation. Around the world, entertainment is still largely regional. So it’s both global and local, and we have to figure out what that is.” In response to a question on India, he stated.
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