Netflix’s slash, cut and win approach in India

Netflix has slashed the rates of its streaming services in India for the first time since it debuted in the South Asian country five years ago. On Tuesday, the streaming service’s basic plan, which allows users to watch its content on a single device, was reduced by 60% to Rs 199 per month. The price of its mobile-only plan has been reduced by a quarter to Rs 149, with the overall pricing of other plans reducing from 18% to 60%.

The slashed pricing was the “real Money Heist”, Netflix quipped in a release, referring to one of its famous television series.

So, what does it mean for the Indian OTT sector? What are the implications? Will other players follow suit by slashing prices?

Dr Sandeep Goyal, MD, Rediffusion, opined that lower rates mean a wider audience and it lowers entry barriers. “Netflix’s move will sooner rather than later be emulated by competition as in such strategies the leader sets the tone. The market will become more crowded before the fittest survive,” he said.

Sumit Rastogi, Director of Business Development, OTTera, pointed out, “India is a price-conscious market, I am sure Netflix has its own focused approach for what they are planning ahead. India is already drifting towards local content now. So, players like ZEE or Sony, or most of the regional-language players, have their own OTT playground in India, and the wave is also trending on that side. So, the strategy behind Netflix’s price point is just to garner more numbers in the long run. If you talk about the content, it’s already A-class. So maybe, they are also trying to attract Tier 2 and Tier 3 audiences towards their platform.”

Binda Dey, Chief Marketing Officer, Kolkata Knight Riders, maintained that Netflix has slashed the price at the right time. According to him, content consumption behaviour has rapidly changed over the last two years in India.

“We have come a long way from consuming only free content on digital to now having more than one OTT app on the mobile with content behind payment walls or some subscription fee. People are now ready to pay for good quality content. The price slash by Netflix comes at the right time to invite a new audience to Netflix. With the investments in developing original content in regional languages in India, it is essential to growing the subscription base. Even after the price slash, Netflix remains one of the most premium subscription-based OTT services in India; but is now more competitive,” Dey added.

While explaining how this is a notable global trend, Elara Capital’s Karan Taurani said, “We believe the lowering of pricing will increase competition in an already fragmented video OTT market with more than 60 apps; this also would lead to a surge in content cost, given that global giants have deep pockets to invest into more large-scale content. Platforms such as Netflix, Amazon and Disney have the advantage of asset-sweating, which helps them invest heavily into large-budget shows that can be monetised globally, due to their effective distribution mechanism and customer recall. Netflix commands a share of ~40% in India’s SVOD market. India’s OTT market is currently dominated by advertising-based video on demand (AVOD); however, in the medium to long term, there would be a change in customer viewing habits, which is likely to improve willingness to pay for large-scale content for an ad-free experience.”

On the possibility of other players following suit by slashing their prices, Uday Sodhi, Partner, Kurate Digital, remarked, “All the players will need to relook at pricing and content strategy now. This move by Netflix means they will double down on local content creation also and go after more mass-based content and look at a larger regional footprint. The existing OTT players will need to rethink their strategy and up their investments in content and user experience.”

According to him, Netflix is changing gears and will not go after the huge Indian mobile consumer segment.

“With aggressive pricing on the mobile and SD pack of 149 and 199, they are obviously looking at a market share gain in the Indian market. Other OTT players will have to deliver more value, better user experience, and much better content if they have to compete with Netflix,” he said.

Sodhi does not subscribe to the view that the Indian market is getting crowded or fragmented. “It is still in the high growth phase and will get many more new interesting players in the next year. It is a great time for the OTT content industry and viewers,” he concluded.