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Netflix Looks to Build on Its Success in India

By Harsh Chauhan - Jul 17, 2019 at 3:17PM

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The streaming giant is getting its act together in a lucrative video streaming market that could be worth $5 billion in the next five years.

India has been a tough nut to crack for Netflix ( NFLX -2.33% ), but it looks like the streaming giant has finally unlocked the path to success in this potentially lucrative video-on-demand market.

Counterpoint Research reports that Netflix saw a surge in India in 2018. The streaming specialist has given independent filmmakers and production houses with small budgets a way to showcase their talents, and this has worked out well even as Netflix charges a higher price than competitors.

Miniature chairs on a laptop keyboard facing a video playing on the screen.

Image Source: Getty Images.

Netflix gains traction in India

The Boston Consulting Group (as reported by CNBC) estimates that India's video streaming market was worth $500 million last year, but it could grow tenfold to $5 billion by 2023. Netflix got off to a slow start in this market thanks to a shallow content library and its premium pricing, but it has managed to get back on track thanks to its focus on generating relevant content.

CNBC reported that industry sources estimate that Netflix now has around 1 million subscribers in India, up from the half million subscribers that it reportedly had last year. This impressive growth has happened despite Netflix's strategy of sticking to a premium price point in the Indian market.

The company's monthly plans in India range from approximately $7.20 to as much as $11.50, while Amazon charges $14 for a whole year of its Prime Video service. Disney's Hotstar premium annual subscription sells for a similar price, making Netflix a substantially expensive option in this price-sensitive market.

Netflix's growth despite the fact that it charges a premium compared to its rivals is a testament that its strategy of developing local content has been working in its favor.

More specifically, the company has commissioned 22 local-language films and 12 originals for the Indian market. Netflix has already launched nine of those films, along with six original web series. All of this helped the company boost its growth in the Indian market last year, and with much of the pipeline still to see the light of day, one can expect Netflix to gain further traction.

What's more, the company has now gained a key executive to boost India-centric growth. Aashish Singh has joined Netflix as a director of its original films division. Prior to this, he was the CEO of local production house Balaji Telefilms, the company behind some big blockbusters in the Indian film industry.

Such a move indicates that Netflix is looking to strengthen its India-specific content pipeline, which will be critical to its growth in this market. But that's not the only way Netflix is trying to get its hands on more subscribers in India.

Exploring more ways to boost growth

Netflix's reluctance to lower its subscription rates in India has kept the company confined to a select audience. The company has mainly focused on the Hindi-speaking audience, while its rivals have been developing content in regional languages as well.

However, Netflix is reportedly testing different subscription plans to lure more customers. In March, Indian financial daily newspaper The Economic Times reported that Netflix was testing a low-cost mobile-only subscription model.

At 250 rupees per month (or approximately $3.65 at the current exchange rate), the mobile-only plan is half the price of Netflix's 500-rupee entry-level plan. Of course, the mobile-only plan has limitations, such as it will only run standard-definition content and can only be used on one screen at a time.

But such a plan could help Netflix make a bigger dent in the Indian market, where the majority of the people consume content on their smartphones. India has the highest per-smartphone data usage in the world at 9.8 GB a month, according to Ericsson. The telecom giant estimates that mobile data traffic per smartphone in India will increase to 18 GB by 2024, driven by an increase in the consumption of video content.

So Netflix is making the right move by targeting the smartphone-centric audience in India with a cheaper plan and a stronger content library. Such initiatives will go a long way in helping Netflix achieve its 100 million-subscriber target in the country.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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