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Why India Is an Important Market for Netflix

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Identifying the key growth drivers in India

After success in many non-English speaking regions in Europe, Latin America, and Asia, Netflix (NFLX) is looking to strengthen its presence in the second-most-populated country—India.

The growing Indian middle-class with higher income levels has encouraged the video streaming giant to be highly optimistic about its contribution to the Indian market going forward. Faster rollouts of 4G (fourth-generation) service by leading carriers Reliance Jio, Vodafone (VOD), and Bharti Airtel continue to act as a catalyst for the company to boost its presence.

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High-speed Internet service is the prime requirement for Netflix’s operation in any region. According to Telecomlead, India had 238 million 4G subscribers at the end of 2017. That should create a huge opportunity for Netflix to invest more in original series that target the Indian population. Higher mobile penetration, particularly growth in smartphone usage, and low-cost Internet plans have set the stage for Netflix to launch important content in the country.

Is India a substitute for China?

China (FXI) and India (EPI) are both large potential markets for Netflix. The company failed to penetrate China due to its strict government regulations. To offset that, it’s aggressively targeting Indian audiences with both local and English content. The Internet TV giant made its debut in India in 2016, which was already dominated by various TV channels and Hotstar (FOXA). However, it has recently stepped up its investments in India by tie-ins with popular Bollywood stars to launch original movies and TV series. India’s media and entertainment market are anticipated to cross $31 billion in the next two years, from $22.7 billion in 2017.

From the graph above, you can see that Netflix has had strong international revenue growth in the last five quarters. Its international segment has grown at a CAGR (compound annual growth rate) of 13.3% in the last five quarters.

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