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Netflix Makes a Smart Move in Its Quest for 100 Million Subscribers

By Harsh Chauhan – Jun 1, 2020 at 8:37AM

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The streaming giant has come up with a smart promotional plan to lure more subscribers in this fast-growing market.

The novel coronavirus pandemic has been a source of economic despair across the globe as people have been forced to remain at home to contain the spread. But entertainment seekers looking for alternatives to closed malls, theaters, and amusement parks have given Netflix (NFLX -4.49%) a nice shot in the arm.

The streaming giant recorded terrific subscriber growth for the quarter that ended in March, and it expects to see a huge spike in the current quarter as well. The good part is that Netflix is now taking proactive steps to boost its subscriber base in emerging markets such as India, a country where its long-term aim is to reach 100 million subscribers.

Person streaming video on a mobile phone.

Image source: Getty Images.

Netflix's latest move could be a smart one

Netflix has been trying out a host of offers over the past few months to attract more users in India. From creating a budget, mobile-only plan to offering the first episode of an original series for free, it has been making consistent efforts to boost its user base in that emerging market.

Now Netflix will offer free upgrades for one month to new users who sign up for its basic and standard plans in India, according to a report by Gadgets 360. This means that any new user signing up for Netflix's basic plan -- which costs 499 rupees a month (about $6.60) -- will be automatically upgraded to the standard plan that costs 649 rupees a month (roughly $8.59) for the first 30 days.

Similarly, new users opting for the standard plan will get free upgrades to the premium tier, which costs 799 rupees (roughly $10.57) a month. Once the 30-day promotional period is over, users can choose to stay with their original plans or opt for the upgraded plans by paying extra.

This seems like a smart move from Netflix, as it might help the streaming specialist boost its revenue and user base in India at a time when people have been spending more time on the platform and showing a higher interest amid a nationwide lockdown.

Staying ahead of peers

Third-party data suggests that Netflix has been doing well in India during the novel coronavirus lockdown despite charging a premium compared to peers.

Market research firm Kalagato estimates that Netflix users spent an average of 80 minutes per day on the platform toward the end of March, compared to a daily average of 46.4 minutes at the beginning of February.

Content aggregation service JustWatch (which aggregates different streaming services into one app) recently reported that it saw a 204% increase in interest in Netflix on its platform over a one-month period ending on April 24.

This was much higher than rivals such as Amazon's (AMZN -3.01%) Prime Video and Disney's (DIS -2.60%) Disney+Hotstar, which saw spikes of 189% and 149% in user interest during the same period, respectively. The interesting thing to note here is that Amazon's Prime membership in India costs 999 rupees (roughly $13.20) a year. Meanwhile, the annual Disney+Hotstar membership can be had for either 399 rupees (around $5.27) or 1,499 rupees (approximately $19.81), depending on the plan.

Netflix's plans are much more expensive than those of these rivals. Its cheapest mobile-only plan costs 199 rupees a month or 2,388 rupees ($31.55 at the current exchange rate) a year and allows users to watch content only in standard definition on smartphones or tablets.

Netflix is witnessing a surge in user interest despite its pricing disadvantage. Its new promotional plan could help it convert that rising interest into more subscribers while paving the way for stronger monetization at the same time.

As such, Netflix investors should be pleased with the company's latest plan to make a bigger dent in India's fast-growing video streaming market, which is expected to clock a compound annual growth rate of 22% through 2023, according to PricewaterhouseCoopers' estimates.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Netflix, and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney, short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and short July 2020 $115 calls on Walt Disney. The Motley Fool has a disclosure policy.

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