Netflix (NASDAQ:NFLX) is already the worldwide streaming leader, with more than 158 million subscribers around the globe. Not content to stop there, the company has employed a number of tactics to increase its customer rolls.
India has been an area of particular interest to Netflix. With more than 1.3 billion citizens -- accounting for nearly 18% of the world's population -- the country represents a lucrative opportunity for the streaming pioneer, but it isn't without its challenges. Netflix has employed a number of strategies to appeal to the market, including ramping up its local language original programming and testing an inexpensive mobile-only plan.
Now Netflix is going even further, reportedly testing extended subscription plans at significant discounts.
New pricing plans
New customers in India may be afforded the option of choosing between longer subscription plans, as Netflix continues to fine-tune its strategy in one of the world's largest consumer markets. The company is reportedly offering three-month, six-month, and 12-month plans at discounts of as much as 50%, according to a report by Reuters that cites "a person familiar with the matter." A three-month plan will fetch a 20% discount compared to the regular monthly price, while six-month and 12-month plans will offer 30% and 50% discounts, respectively.
Netflix confirmed the test in a statement, saying of the move, "We believe that our members may value the flexibility that comes from being able to pay for a few months at once. As always, this is a test and we will only introduce it more broadly if people find it useful," though the company didn't offer up any further details.
Back in July, Netflix launched a mobile-only streaming plan for customers in India for 199 rupees a month, or just under $3 at current exchange rates. The subscription plan is limited to a single smartphone or tablet and is a significant discount from the company's basic plan, which starts at $9 per month.
Netflix had been testing the cheaper, mobile-only plan in a number of countries, including Malaysia and India, before a broader roll-out earlier this year. Netflix discussed the move in its second-quarter investor letter:
After several months of testing, we've decided to roll out a lower-priced mobile-screen plan in India to complement our existing plans. We believe this plan, which will launch in Q3, will be an effective way to introduce a larger number of people in India to Netflix and to further expand our business in a market where pay TV ARPU [average revenue per user] is low (below $5).
This illustrates one of the challenges Netflix faces in parts of the developing world. The average per capita annual income in India is roughly 80,000 rupees, or about $1,130. This makes even its basic plan seem pricey by comparison, costing nearly 10% of a person's monthly income.
Catering to the local market
Speaking at a conference in New Delhi earlier this month, CEO Reed Hastings laid out some of the company's plans to tap one of the world's most populated markets. Netflix plans to spend $420 million on local language content between this year and next.
The company has already been investing heavily on content in India, resulting in a number of highly successful original shows. Police series Sacred Games was nominated for a number of international Emmy Awards, and animated program Mighty Little Bheem was watched by more than 27 million households outside India alone. Recently released police procedural drama Delhi Crime has generated strong buzz since its debut at the Sundance Film Festival. The series was recognized with multiple prizes at the Asian Academy Creative Awards earlier this month and boasts a 92% score on review aggregation site Rotten Tomatoes.
Hastings had previously addressed the enormous opportunity in India, pointing to the country's "phenomenal" growth in internet connectivity and increasing adoption, saying "Given the consumer base, the next 100 million [subscribers] for us is coming from India."
As subscriber growth in its domestic market slows, Netflix is looking to international markets to fuel the next wave of its growth. In the third quarter, U.S. subscribers ticked 6% higher year over year, a far cry from its international subscriber base, which increased more than 33%.
Some might question Netflix's strategy of offering discounted plans for subscribers in India, but the tech giant is playing the long game. India has one of the fastest-growing economies in the world, and its middle class is expected to soar from 80 million today to about 580 million, or about 41% of the population by 2025. This represents a massive seven-fold increase in just a few years.
This represents a significant opportunity, one that Netflix no doubt has in mind as it redoubles its efforts in India.