Please ensure Javascript is enabled for purposes of website accessibility

Netflix Is Crushing Disney in This Fast-Growing Market

By Harsh Chauhan - Apr 5, 2021 at 12:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Netflix's premium pricing strategy is bearing fruit.

Netflix (NFLX 0.58%) has been trying to crack the Indian market with various strategies ever since it entered the country five years ago.

And the streaming giant has made solid progress -- London-based consultancy firm Omdia reports that Netflix and Disney's (DIS 3.33%) Disney+ Hotstar streaming platform together accounted for a whopping 78% of India's $639 million video streaming revenue in 2020. Though the firm didn't specifically point out Netflix's share of this pie, a bit of number crunching tells us that Netflix has indeed become a big player in the country. Let's see how.

Person streaming video on a mobile phone.

Image source: Getty Images

Netflix's premium pricing strategy is paying off

Omdia reports that Netflix and Disney+ Hotstar accounted for half of the video streaming subscribers in India last year. Disney's offering reportedly tripled its 2019 subscriber base in 2020, going from 8 million users to 25.6 million, which doesn't look surprising given its pricing structure.

Disney+ Hotstar offers three pricing plans in India, with the comprehensive premium plan priced at 1,499 rupees (approximately $20) per year. The same plan can be bought for a monthly subscription price of 299 rupees (approximately $4 at the current exchange rate), which makes the annual plan a better buy. Disney+ Hotstar also offers an ad-supported freemium model where subscribers don't have to pay the monthly or annual subscription price in exchange for restricted access to the platform.

This is the reason why Disney's average revenue per user (ARPU) remains low in the Indian market, and fluctuates depending on the quarter in which the Indian Premier League (the country's premier cricket competition) plays. As a result, the service saw its ARPU in India drop from $2.19 in the quarter that ended in September 2020 (when the season started) to $0.91 in the December 2020 quarter, indicating that paid subscriber sign-ups dried up after the league ended.

So taking the best-case scenario of $2.19 in APRU into account, Disney would have generated around $56 million in revenue in India in the September 2020 quarter (assuming it hit its peak of 25 million subscribers in that quarter). The company's revenue in the quarter that ended in December 2020 would have dropped to just over $23 million, indicating that it generated nearly $80 million in revenue in the second half of the calendar year.

As such, Disney+ Hotstar's revenue from India in calendar 2020 could have hovered around $150 million to $160 million if we extrapolate the revenue generated in the last six months to the full year. This means that Netflix may have cornered a bigger share of the country's streaming revenue in 2020 -- and that's not surprising given its premium pricing plans.

The cheapest Netflix plan costs 199 rupees (approximately $2.70) per month in India. This is a mobile-only plan that allows users to stream in standard definition format on their smartphones or tablets. Sharing is not possible on this plan, as it supports only one screen. The more expensive monthly plans are priced at 499 rupees ($6.80), 649 rupees ($8.84), and 799 rupees (approximately $10.90). There are no annual plans on offer, nor does Netflix offer any regular free access.

Netflix clearly earns more revenue per user per month than Disney. Given that it had an estimated 4.6 million paying subscribers in 2020, and assuming that each of them paid the minimum subscription price of $2.70 a month, Netflix would have easily made close to $150 million in India last year. However, Netflix's ARPU in India is estimated to have been $5 per month according to a third-party estimate, which means that the company's actual India revenue last year could have been close to double that of Disney's take, assuming 4.6 million paying subscribers. So there's a strong possibility that Netflix took the lion's share of the streaming revenue in India last year based on Omdia's estimate.

The road ahead looks bright

The good news for Netflix is that its mobile-only plan seems to be a hit among the Indian consumers. The company's revenue in India in fiscal 2020 (which ended in March last year) reportedly doubled year-over-year following the launch of the mobile-only plan in mid-2019.

That isn't surprising, as Omdia estimates that 82% of users in India stream video on their smartphones. Netflix is now looking to offer a better experience to its mobile customers through its "Mobile+" plan, which offers high-definition streaming. The plan is currently in a pilot phase and is priced at 299 rupees (approximately $4.07) per month, indicating that the company is looking to drive additional spending and push up its ARPU.

The success of this plan could unlock more riches for Netflix in India, as the online video streaming market in India is expected to hit $4.5 billion in revenue by 2025, according to Media Partners Asia. Mobile devices are likely to account for a significant chunk of that pie, as most of the content consumption is expected to take place on that platform.

Netflix looks all set to make a bigger dent in India's fast-growing streaming market, where the company has been investing aggressively in content and is trying out smart ways to woo more customers.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
$187.44 (0.58%) $1.09
The Walt Disney Company Stock Quote
The Walt Disney Company
$105.83 (3.33%) $3.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.