Netflix (NASDAQ:NFLX) has been making promising moves to carve out a bigger share of the video streaming market in India, but recent developments at Amazon's (NASDAQ:AMZN) Prime Video service could prove to be a new challenge.

The streaming specialist has been trying to woo more subscribers in India by trying to improve its value proposition through price reductions, free episodes, and free one-month upgrades for new users. Netflix needs to make such moves too, as it is pricier compared to other video streaming services in India -- but they might not be enough, as Amazon is now bolstering its content library with India-specific movies.

Person streaming video on a mobile phone.

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Indian movies could give Amazon an advantage

The novel coronavirus pandemic has forced India's movie industry to postpone new releases as theaters have remained shuttered for over two months to contain the spread of COVID-19. There is no clarity about when movie theaters in India will open again just yet as the country remains in lockdown. As a result, a few movie producers are now releasing their movies over video streaming platforms.

Amazon's Prime Video service is benefiting from this trend in India. The platform will be exclusively streaming seven Indian movies globally beginning with a Hindi-language movie featuring the country's most popular actor, Amitabh Bachchan. There seem to be no such developments at Netflix yet, and that could be bad news for the streaming giant in a market where it aims to hit 100 million subscribers in the long run.

Local movies on Amazon Prime can help the platform acquire more subscribers for a few simple reasons. Last year, Indian theaters debuted more than 2,200 movies for the theater-going public in that country, an enthusiastic base that hasn't been able to go to the theater for close to three months now thanks to COVID-19. Amazon is now giving Indian movie buffs another reason to sign up by directly releasing movies on its streaming platform.

Now Netflix has already proven that India-centric movies tend to do well on video streaming platforms. Extraction -- a Netflix original movie with an India-specific theme -- turned out to be a record-breaking title, as more than 90 million households were expected to watch it in the first four weeks of release.

Amazon will now be aiming to achieve similar success by securing the rights to a slate of Indian movies in different languages, including Tamil and Telugu, that saw a massive spike in ticket bookings last year. A third-party report reveals that Telugu movie bookings jumped 116% in India last year, while Tamil bookings shot up 78%.

So Amazon seems to be making the right moves on the content front to corner more subscribers in India, and this could play in the company's favor considering Prime Video's affordable subscription rates.

Netflix's premium pricing could pose a challenge once again

Though Netflix has been trying to offer Indian consumers more value for money over the past year, it continues to remain quite expensive when compared to the likes of Amazon's Prime Video. Netflix's mobile-only plan in India costs 199 rupees a month (roughly $2.65). And there are several limitations with this plan, such as the lack of high-definition content and a restriction to just one smartphone or tablet.

The full-featured plan costing 799 rupees (around $10.58) a month and gives users access to four screens and ultra-high-definition content. On the other hand, an Amazon Prime subscription can be had for just 129 rupees (roughly $1.71) a month, or 999 rupees ($13.22 approximately) annually.

At these prices, Amazon Prime subscribers not only get access to unlimited video streaming, but they also get a lot of other perks such as ad-free music, priority delivery of items bought on the e-commerce site, and early access to deals, among others. And now that Amazon Prime Video will screen direct releases of Indian movies at those prices, it could increase its lead over Netflix in India.

According to market research provider KalaGato, Amazon's Prime Video was the third-largest video streaming platform in India a year ago with 10% market share. Netflix's market share was just 5%. Amazon can build upon that position if it can continue to regularly stream new releases on Prime Video in India, improving its prospects in India's fast-growing online video streaming market, which is expected to clock nearly 22% annual growth through 2023 as per PwC.

Netflix, on the other hand, will have to pull up its socks and come up with a competitive content strategy to achieve its long-term goal in India.

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.