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2 Major Challenges Tech Companies Must Overcome to Crack India's Code

By Motley Fool Staff - Jan 28, 2016 at 10:02PM

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Netflix and other video streamers might experience culture shock trying to make a dent in this market.

India's media culture is significantly different from what U.S.-based companies are used to, and companies such as Netflix (NFLX 0.70%), Alphabet (GOOGL 0.33%) (GOOG 0.42%), and (AMZN -0.18%) will need to come up with some creative solutions to appeal to the market.

In this clip, Dylan Lewis and Sean O'Reilly talk about the problems video streaming providers face in trying to offer their services for a fixed fee per month, and how the popularity of piracy in the country might throw a wrench in their plans.

Listen to the full podcast by clicking here. A full transcript follows the video.


This podcast was recorded on Jan. 22, 2016.

Sean O'Reilly: So, Dylan, what are some of the other issues that are going to be a little harder to address? Because obviously, YouTube is having some success with their offline downloading. Facebook is having Facebook Lite. That's not the whole problem, though.

Dylan Lewis: No. There are some other issues. Like we've said, tech companies have been very good at finding creative solutions to cater to Indian consumers right now. I do think that there are some things that are going to be a little tougher to get around, one of them being there's a very pervasive culture of ad-supported models in India. Not a problem for your Facebooks and Googles. A little bit more of a problem for Amazon, depending on how much appeal you think their Prime streaming option really has. But obviously, this is tough for Netflix. So, there's another fantastic article I'd like to point some of our readers to: "India Offers Atypical Video Challenges" -- this is from the Times; I think it came out in late December of last year.

One of the companies they profiled was Eros International (ESGC). This is actually a publicly traded company on the U.S. exchanges. They're a studio that, in a lot of ways, are the Indian Netflix. And rather than just have the premium model of $8 or so a month, they have a free limited catalog option for people, and it's ad-supported. I think the fact that the native competitor for Netflix, it's like a Bollywood studio putting out the type of content that Netflix would be in a lot of ways. Doing that just kind of signals that it's something that, you need to change the appetite of the consumer a little bit, and get them used to paying for content a little bit more. I think one of the reasons that YouTube has been so successful in India is because they were able to get some major studios on board with putting out their content for free, and have it be ad-supported and do an ad-revenue split.

There wasn't really a rerun culture in India for a while, and YouTube and Google did a lot of convincing to get those studios to do that, they were like, "Hey, why don't you put this online? People will still want to watch it." And they've enjoyed some nice ad-rev slips because of that. So I do think that's one thing that's a little difficult to overcome.

On the same note, torrenting, in parts of Asia, India in particular, is everywhere, it's pervasive. That's another thing. I think torrenting also plays into the idea of only having limited connectivity. Right? So if you know that you are going to have really great connection for three hours while you're hanging out with your friends or something like that at the library, you're going to take advantage of that, download something you can watch offline, a full-length movie or something like that, and then watch it when you're back home, because you have it in an offline file. So, that's another issue, I think, that will be particularly difficult for, like you said, Amazon's streaming option, and Netflix's streaming option as well.

O'Reilly: Yeah. And I have to think this problem will eventually get solved, because as I understand it, India's film industry, with studios like Eros, it's fairly sizable. I have to imagine a world where Jeff Bezos is wanting to get in on that and distribute it through Prime or something.

Lewis: In the Fortune profile on Amazon and their efforts in India, they said this was a trillion-dollar opportunity; we are looking to explode in India. So they're throwing a ton of money at it. I'm sure they'll crack code. Like we've said, it took some creative solutions to really cater well to the market. With some of the other issues, I'm sure these companies will do the same here, with torrenting and the reliance on the ad-supported model and that familiarity, but it might take some time.

O'Reilly: Cool.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Dylan Lewis has no position in any stocks mentioned. Sean O'Reilly has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares),, Facebook, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
$119.94 (0.33%) $0.39
Netflix, Inc. Stock Quote
Netflix, Inc.
$242.84 (0.70%) $1.70, Inc. Stock Quote, Inc.
$141.84 (-0.18%) $0.26
Eros International Plc Stock Quote
Eros International Plc
Alphabet Inc. Stock Quote
Alphabet Inc.
$120.82 (0.42%) $0.50

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