Back in February 2018, Netflix (NFLX -0.57%) CEO Reed Hastings spoke confidently about how the company's next 100 million subscribers were likely to come from India. But recent comments suggest Hastings may be a bit less confident.

Speaking to analysts on the company's latest earnings conference call in April, Hastings remarked that the streaming giant is "still figuring things out" in India -- evident from the multiple pricing options Netflix keeps rolling out in the country. Hastings also said that India is a "more speculative investment" than markets such as Japan or Korea.

The comments suggest that Hastings has toned down his bullishness about India since making that huge claim in 2018. Let's look at some of the reasons why that may have been the case.

Person streaming video on a smartphone.

Image source: Getty Images.

Netflix's subscriber base in India remains small...

According to consulting firm Omdia, Netflix ended 2020 with 3 million paid subscribers in India, up from an estimated 2 million paid subscribers at the end of the previous year. That's impressive annual growth, but it is worth noting that Netflix has been operating in India since the beginning of 2016.

Netflix's rivals have built up much larger subscriber bases over that time. Amazon's Prime Video service was launched in India at the end of 2016, and the service boasted 5.83 million subscribers at the end of 2020 -- nearly double Netflix's base. Disney's (DIS 1.55%) Hotstar streaming service, meanwhile, more than tripled its paid subscriber base in India last year to 18.7 million.

Amazon's and Disney's superiority over Netflix in terms of subscribers isn't surprising. Netflix's premium pricing and lack of live sports content put it at a disadvantage over its rivals, hindering the company's goal of reaching its ambitious target of 100 million subscribers in the country. This tells us why Netflix management said they are still figuring out the Indian market, despite spending more than $400 million over the last two years on country-specific content.

...but that shouldn't be a reason to worry

Netflix's small paid subscriber base in India may indicate that the company is falling behind rivals on the market share front, but that's only half the picture. The streaming specialist's higher-priced subscriptions helped it corner the lion's share of India's online video streaming revenue of $639 million in 2020. Netflix beat Disney's Hotstar comprehensively in terms of revenue share despite a much smaller subscriber base.

This shows that Netflix commands strong pricing power in India, reflecting in the company's higher average revenue per user (ARPU), which is more than double Hotstar's. So, there is an upside to Netflix's slow pace of subscriber growth in India. The company has successfully brought the higher-value audience into its fold so far, and it is now looking to expand its base with a couple of smart moves.

Netflix is reportedly piloting a new mobile plan priced at 299 rupees (approx. $4 at the current exchange rate) per month with select customers. This plan will sit above the base mobile-only plan priced at 199 rupees per month (around $2.66). It will allow customers to watch content in high definition on smartphones, personal computers (PCs), and notebooks. For comparison, the basic mobile-only plan is restricted to standard definition and is only functional on smartphones.

This plan can attract the existing users of the mobile-only plan because of the added goodies and bring new users into the company's fold, as close to 90% of online videos in India are streamed on smartphones. Additionally, Netflix will be releasing 41 new original titles in India this year. So, the combination of a (potential) new pricing plan and more content could help the company score more subscribers this year, leading to robust revenue growth by pushing up the ARPU and helping Netflix corner a bigger share of this video streaming market.