Netflix (NASDAQ:NFLX) is most definitely going to India. Rumor has it that the streaming video service will launch in the second most populous nation in short order, squeezing in line before other big markets like China and Russia. Let's see if that claim holds water.
Circumstantial evidence in favor
According to a report in The Times of India, Netflix is already striking content deals in the country. The newspaper's anonymous industry insiders pointed out "iconic shows including Buniyaad, Nukkad and Malgudi Days," and support for various mobile devices.
For those unfamiliar, Buniyaad is a drama series set in the time of India's separation from the British empire. It first aired on the local Doordarshan network in 1986 and has been rebroadcast many times since then. The title translates into Foundation, and the show is seen as "an inseparable part of the Indian psyche." Think of it as the Indian take on Dallas or North and South, heavily salted with national history and soap opera characters.
From the same Doordarshan media empire and the same golden age of Indian television comes Nukkad. Titled The Street or The Corner in English, the 40-episode series portrayed the struggles of India's working class in a gritty slice-of-life format. It is kind of like Hill Street Blues married Slumdog Millionaire, spawning three seasons of must-see television.
Last but not least, Malgudi Days was also produced by Doordarshan in the '80s. The series spans 54 22-minute episodes. Fifteen of these chapters were actually produced many years later, when Malgudi Days was revived in 2006. If the name sounds vaguely familiar, you may have seen Indian restaurants adopting the Malgudi moniker, which was invented by the writer of the original source material. It is a coming-of-age story, perhaps best compared to The Wonder Years.
Netflix certainly plans to enter India with a significant catalog of classic materials, and these three series would fit the bill. The fact that all of them were produced by the same major content studio also lends an air of authenticity to this report.
Netflix likes to strike package deals with content producers as a simple and efficient way to build a catalog. In the U.S., the company has exclusive distribution contracts with Walt Disney and Dreamworks Animation, for example.
Netflix sees these deals as content-portfolio boosters and also as a way to widen the business moat with exclusive shows. Meanwhile, Dreamworks and Disney get to embrace a brand new distribution platform with the promise of global coverage. Doordarshan may very well have struck a similar deal, and some of the content may even leak into Netflix territories outside of India.
Adding India also makes sense thanks to the sheer size of the connected population there. According to Internet Live Stats, India has 243 million Internet users. That is just behind the United States at 280 million (and far behind China's 642 million), and a meager 19% market penetration points to strong growth ahead.
The mention of mobile support also increases the chances that India Times is on target here. Almost 90% of India's online users rely on their tablets and smartphones, connected to one of the nation's many 4G wireless networks. Fiber, cable, and DSL infrastructure is an expensive idea in this sprawling country, but wireless signals can work almost anywhere. Many Netflix customers are likely to soak in their daily dose of Malgudi Days and Buniyaad (or whatever else) on the small screens in their hands, at least initially.
Finally, the time is right to take this step. Other companies have started up their own online video services in India, hoping to steal the thunder before Netflix arrives.
Netflix surely will not be first to market in every region around the globe, but it seems like a good idea to get a jump on India before the competitive landscape becomes too complicated. You have already seen the size of this thing. The region is packed with sophisticated technology businesses, providing fertile ground for a streaming video service. And the Bollywood entertainment industry is thriving, growing ticket sales by 10% each year, while Hollywood revenues are doing the lobster walk. Get in while the getting is good!
Oh, and Netflix has a healthy relationship with Mumbai studios. The American Netflix service boasts 85 legit Bollywood movies right now. That is a mighty good start.
Or maybe not ...
Though there are plenty of solid reasons why this report makes sense, it is equally easy to find evidence pointing in the opposite direction.
For one, those anonymous sources might be setting up a smoke screen -- inspire local names to invest in the digital video market, even if Netflix has not made any real moves in that direction yet. These things happen.
The triple serving of cited Doordarshan titles could be a good sign, or simply the result of newspaper reporters getting their information from a single source. That source may or may not have the true inside story. In other words, the entire Netflix package of tempting 1980s dramas could be a mirage.
Perhaps most damaging of all, Netflix is always looking for language experts to support its global ambitions. But right now, the company does not need any Hindi speakers. Instead, Netflix is looking for linguists fluent in "Arabic, Simplified Chinese, Russian, Polish, and Turkish."
Granted, these job postings are not exactly a direct map to the next expansion market. Netflix has been looking for Arabic and Polish speakers since at least 2013 and still has not announced any services in Saudi Arabia or Dubai. But I have never seen Hindi mentioned in these lists (and I do check up on it every once in a while). So either Netflix is all set with its Hindi translation needs, or it will not need them until the entire worldwide expansion has played out.
Netflix does intend to cover every market it can reach, no later than the end of 2016. It is a major ambition, and India must show up somewhere in that roll call.
The question is: Will Netflix give India priority in its hunt for global markets or wait until later? With all this evidence in hand, I am not convinced that the tickets to New Delhi and Bangalore are coming up in 2015. This rumor will eventually come true but probably not this year and perhaps without those classic TV titles.
As a shareholder, I would absolutely love to see this mega-sized market tackled as soon as possible. So feel free to prove me wrong, Netflix.
I just don't think you will.