Netflix has emerged as a game changer. It’s a classic, iconoclastic business story. It has changed the way people watch TV, and has given some power back to the customers by giving them the freedom to watch TV when they want it, on multiple platforms. Netflix’s rise has been stupendous in the past few years. Its now a solid business model which other companies are emulating. (we now have services like oyster.com dubbed as Netflix for books). Interesting fact- Back in 2000s, Blockbuster refused to buy Netflix for 50 million dollars and decided to partner with (now infamous) Enron instead. Ten years later Netflix led to the demise of Blockbuster and its ultimate bankruptcy.
It is easy to be a Netflix addict, especially if you live in polar vortex hit Midwest and tend to hibernate during atrocious winter months. Netflix is this bloody addictive thing that exploits our binge watching psyche so well – that “next-episode-starts-in 5-seconds” thing, it justifies the famous joke that Netflix gives you a few seconds to reclaim your life. Netflix has popped up in our post binge-watching/feeling-guilty discussions. about how it came into existence, how it lead to the demise of Blockbuster like services and changed the face of TV, How it makes money, how it makes content deals, how it tries to stay afloat, what’s with Silverlight still being used as a technology, what really goes on behind Netflix’s suggestion algorithm, etc.…And of course, why is Netflix not available in India?
The India story:
India and Netflix are a match made in heaven. At least on paper. We make the maximum number of movies in the world per year. Churning out more than 1000 movies a year in different languages. Indians watch the maximum number of movies anywhere in the world and at any given time there are roughly 2-3 million people watching a movie in theaters/TV in India(that’s an old stat I frequently use, I am sure the numbers have gone up drastically). Indian TV channels broadcast 24/7, non stop. The content, well, let’s not go there. I would have said that our saas-bahu shows are unique at least in format, but ever since I watched these latino shows on telemundo, I cant claim that anymore. I am struck by how similar they are to Indian TV shows in their formats. Not sure who copied whom though. (check here for some proof). so yes, the TV content is in available in abundance. Not to mention local content in so many languages, 100s of regional channels, news, entertainment, you name it. And to top it all, there is cricket, IPL and so many other potential avenues which can be tapped. And English shows are anyway quite popular in India and there is a significant audience base who watches English channels. so we are talking about a big hitherto untapped market and potentially millions of subscribers.
Netflix thrives on subscribers, it is ad free, its hard to imagine that they make any money at all despite having more than 30 million customers worldwide. But they do, at least since past few quarters the stocks have been rising consistently. Reed Hastings, the CEO has late turned the fortunes of a once loss making venture and has rechristened it as the new way to watch TV. How long they will be a able to continue making profits without venturing into markets like India is questionable. The fortune-turning shows like “House of cards” cost a bomb(think in the range of 100 million dollars) and Netflix has to pay for the existing content as well. so they would constantly need new subscribers. Even if I consider only 2-3% of Indian population having Internet connection, that’s still a market bigger than an average European country.
One strategy could be to leverage on existing content collaboration deals. Netflix already seem to have content deals with Yashraj films and UTV and a few others which provide them with some quality Indian movies(I know, a misnomer of sorts). If they bring in some of their content to India and charge not so premium subscription fees. It might work. Another way to gain entry into restrictive Indian market could be to partner up with local Netflix like services eg : Box tv, spuul, big flix the 3 key players that provide a Netflix like service in India. The local players would understand the Indian tastes (well actually nobody can gauge the Indian audience mood), or at least would know the intricacies of content distribution system in India.
Pricing has to be crucial though. If its too pricey, It wont work in India because we are not used to pay-for-content and piracy is rampant. The rates have to be competitive though. In US its usually 8.5$ a month. I am sure millions of people share their Netflix accounts with friends and relatives and it would be even more so in India, but even if u consider one household getting one connection, it is still a humungous market waiting to be explored. And hungry for it.
The target audience would be varied. I don’t see Netflix getting to penetrate deep into rural India, but they would ultimately have to go there if they want to expand on local content. But first step would be to get the people who are tech savvy enough and willing to pay for content. I don’t see housewives getting much into Netflix. They get their daily dose of TV soaps from the hundreds of channels that serve the same saas bahu sagas. Working women? well may be. But how do we assume that they don’t like saas bahu stuff. Netflix will have to follow the think local act global approach that Mc D, KFC and numerous other global brands have done. My argument may be seriously flawed here because I might be thinking only in terms of the IT crowd who are used to devour their daily dose of entertainment from their laptops and tablets. I am sure those who subscribe to Bigflix like services would want to watch some content like “Orange is the new Black” which they might not be comfortable watching with their kids and spouses. Another demographic would be single working guys. And people who are exposed to foreign shows want to see more of them, demand more intelligent content and want to have it on demand. A very plausible scenario- In scorching summer months when it is absolutely impossible to go out during the day, and its a perfect time for binge watching- Netflix releases a series like 24( Indian version).
Okay all the above sounds achievable, but sadly the challenges outnumber the benefits.
The challenges:
The biggest USP of Netflix is that is gives us freedom from content censorship. In a country like India where any content is pretty much censored considering its very easy to hurt sentiments of people, religious or otherwise. Even the relatively modest “dirty picture” wasn’t shown on cable television. Netflix could act as a savior from content censorship. And Netflix has been doing exactly that- pushing the envelope with sensational content that would have otherwise never been shown on TV, even in US. Take Orange is the new black for instance, a netflix original, a story of a lesbian-turned-straight girl who lands in prison and how her life changes after that. The series open with a lesbian makeout scene.And is full of explicit, uncomfortable content that would have proved hard to be shown on conventional TV. Or take the emmy nominated, golden globe winning, House of Cards which solified the netflix way- unconventional storylines and “content is the king” principle. On Indian TV we have seen many promising new series getting aired which later gets digressed to saas bahu territory because of faltering ratings. The fact that it Netflix shows are now getting wide acceptance for being courageous when it comes to content. Anybody remembers that amazing attempt that Sony did with yrf tv.? They had some 4-5 shows especially targeted at audiences who wanted to watch better content, more youthful and powerful storylines, strong acting and so on. That sank disastrously! The even with a prod house as big as YRF, there are no safe bets, because the Indian audience is so flickering. That closed down because of poor ratings. Imagine if shows like Powder and Rishta.com had opened on Netflix, they would have at least survived the rating onslaught and in turn would have attracted more subscriptions. House of cards helped Netflix get millions of new customers in just 3 months.
The biggest hindrance is of course piracy. Second is perhaps the content laws, Netflix spends billions of dollars in contract terms every year. In India even the biggest content deals would not exceed millions with big production houses. The ecosystem to support distribution, copyrights etc. is yet to be established. But I am sure there could be workarounds. But piracy is rampant. Any roadside shop sells all sorts of pirated content in less than 10 Rs. It is very debatable how would the Netflix cost model would sustain. The cost of quality content on DVD etc are not that exorbitant in US and people are willing to pay for content in general,and have been doing that for years now. Such customer behavior is pretty nascent in India . India as a market is drastically different from US or Europe. Recently Flipkart’s e-music service closed down because they couldn’t sustain due to the lack of a solid micro-payment environment. DVD service will never work in India. Forget the distribution ecosystem, The DVDs wont get returned at all . I am not sure how Bigflix or others do it. Netflix already burnt its hands when it tried to divide the DVD business with Quickster and failed miserably and though it works in US, I don’t see it happening in India any time soon.
Cost is going to be a big factor of course. Think how McD had to come up with 20Rs menu to increase its reach. Unless its open for mass consumption and at competitive rates like it is in US, I don’t see Netflix making any profits at all.
Questionable broadband speeds. This is a key point. Services like Netflix rely on good Internet speeds and robust networks. Frankly, I don’t have good broadband speeds in Almora, or even in many other parts of Uttarakhand. so, I wouldn’t get Netflix even if it was affordable. Broadband and good speeds have mostly been a city centric luxury. Although with dropping broadband costs and increasing rural reach, high speeds are soon becoming a reality in India sometimes speed even faster than what is out here in US. But for it to become a pan Indian necessity, it will still take a few years.
It will be interesting to see if at all Netflix ventures into new markets like India. I haven’t even touched China or even Russia, not sure how they have gained in-roads into Latin American markets. But if they want to “become the HBO, faster than HBO becomes us” they will have to think on these lines soon.