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Netflix to Grow in India, Plans $420 Million Content Spending

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Netflix (NFLX) is now writing its international growth story, and India has a significant role in it. CEO Reed Hastings declared his plans to invest 30 billion Indian rupees (or $420 million) in India, reported Bloomberg on December 6. The expenditure, which Netflix plans to do this year and next year, is to focus on local content. To get an edge over home-grown rivals, the company feels it is crucial to strike the right chord with the audience.

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Hastings said, “We got one eye to being very local and authentic and one eye to what will be shared around the world,” noted Bloomberg. “But that is the advantage of Netflix to be able to produce in India and share that,” added Hastings. Notably, Netflix plans to invest in Indian content and share it around the world.

Citing industry sources, TechCrunch revealed that this move is by far the most significant investment by any streaming service in India. It also cited a KPMG report, which indicated that Hotstar would invest $17 million in seven original shows. It also stated that Eros Now would spend $50 million for one hundred originals.

Netflix has targeted content spending of $15 billion this year. And Hasting’s new plan indicates that about 3% of the total expenditure will be toward Indian content.

Indians have an affinity for vernacular content

India has vast linguistic diversity. An article by Media India Group, citing a finding by KPMG, states that about 95% of video consumption in India is vernacular.

The country’s audiences have matured and developed a taste for diverse genres of global programming. However, a broader base of viewers still prefers regional content, something with a local flavor.

Therefore, Netflix aims to offer shows in several languages to be ingrained in Indian culture. In an interview, Reed Hastings said he wants the process to be step-by-step, notes Live Mint. He said, “First, we have to be very strong in Hindi and English. Then, get into Telugu and Tamil and many other vernacular languages.”

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Disney-backed Hotstar and local players give fierce competition

Like in other Asian markets, Netflix has tough competition from local players in India. The leading regional streaming platforms, Sun NXT, Addatimes, Hoi Choi, and ShemarooMe, have seen impressive viewership growth in a short period.

Disney-backed Hotstar is by far Netflix’s biggest contender in India. In July, Business Today reported RedSeer Consulting director Ujjwal Chaudhary revealed, “Hotstar’s vernacular or Indian content and sports content is definitely one of the reasons for a larger user base.” Business Today noted, “Also, Hotstar’s freemium model is aggressively positioned against players like Amazon and Netflix, he added.” Indian audiences are fond of watching videos on smartphones. Realizing this fondness, Netflix launched a mobile-only subscription plan for viewers in July, and it was a massive success.

According to a BGR article in November, Disney+ (DIS) is planning to debut in the country after the Indian Premier League season in 2020. However, instead of a separate app, Disney+ shows will be available through Hotstar.

Indian viewership market has huge potential for Netflix

Netflix has big plans for India, owing to its population and the rapid expansion of the nation’s smartphone users. The Internet’s deepening penetration is another significant reason. Barclays reports that by 2020, India’s Internet user base could grow 18% compounded annually to 650 million. It also forecasts the smartphone user base will grow 18% compounded annually to 500 million next year. Based on these estimates, Netflix aims to garner 100 million subscribers in India.

In fiscal 2019, Netflix saw a 700% year-over-year surge in revenue in India. Its differential pricing strategy, regional content, and telecom and broadband partnerships were catalysts for Netflix India’s growth.

Netflix could face censorship threat in India

While Netflix is on its way to add more local spice to its Indian shows, it may have to deal with censorship. Currently, there isn’t any governing body censoring video streaming platforms. However, as bold content is growing, there have been several complaints against these platforms. Therefore, they might face censorship in the future, reported Reuters in October. Netflix knew about the possible restrictions. Therefore, it signed a self-regulation code in January, reports Live Mint. Hotstar followed the same path.

Regional content is crucial for Netflix’s growth in India. However, the company has to be very particular about keeping the viewer sentiment in mind before scripting any content.

At this point, Netflix is optimistic about its growth trajectory in India. We’ll now have to watch how it plans to spend its $420 million earmarked for Indian markets.

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