Why Indian rivals are not worried about Netflix

The entry of Netflix into the Indian market may force existing video streaming players to rethink their strategy.

An end to free subscription, more offline views and creating a basket of original content are some of the mechanisms that the existing service providers may look at to achieve a wider consumer base.

Most players in the business also point that until now players, who were offering a free content, will now follow the Netflix model and convert into a subscription-led model.

Sector watchers, however, point that the Netflix’s premium pricing may still not cannibalise the cable and DTH sector.

Analysts at Edelweiss do not expect Netflix to have any major impact on Indian DTH and cable TV players. It says that Netflix’s rates are on the higher side and broadband speed will also be a challenge.

Netflix’s services are priced at ₹500 per month in standard definition format. Its ₹650-per-month plan offers high definition (HD) format and two concurrent users at the same time, while the ₹850 for four users.

Gaurav Gandhi, COO, Viacom18 Digital Ventures, says it is really hard to predict adoption rates in today’s digital world.

“We should look at the four key factors that helped Netflix in the big international markets and compare the same with the dynamics of the Indian market.”

Gandhi notes that in the US cable TV ARPU (Average Revenue Per User) is around $80-100 while Netflix’s subscription rates are in the bracket of $8-10. That is huge price arbitrage advantage that Netflix and other OTT operators had in the US.

“The Indian cable tv market has one of the lowest ARPUs in the world standing at $4-5, which is the typical ARPU of cable in India. Netflix’s basic subscription plan is virtually double. Even if one takes in the premium HD packs of DTH and cable cos, they same would at best be at par (with all 300 channels ) with the Netflix entry price,” he adds.

Additionally, he points that the high data costs become another challenge that the operator would need to overcome.

Gandhi also noted that Netflix consumption is higher via fixed broadband lines (and larger screen viewing at home) in the US unlike in India where the boom is largely driven by the smartphones.

A Religare Market report notes that the data revolution will start now and a strong internet TV-led media consumption in India driven by growing smartphone penetration and improving bandwidth.

Religare notes that content owners with scope for intellectual property (IP) monetisation will stand to gain as new distribution platforms look to bolster their local content offering.

Abhesh Verma, COO, nexGTV, a digital entertainment platform, says, “The Indian consumer is a different being. They are still reticent to pay high monthly user charge. Even DTH and cable TV players operate in the ₹250 price point to keep the price low and encourage higher adoptions.”

Uday Reddy, CEO and Founder at YuPPTV, said that with Indian players focussing on regional content, Netflix can only become a complimentary service.

Eros Now, which had partnered with HBO to launch premium digital ad free channels on DTH and cable, notes that the high pricing may alienate the middle class.

Jyoti Deshpande, Group CEO, Eros International, said, “In our experience when we have partnered with HBO to launch the even the ₹200 pricing for two channels meant a ceiling of 200,000 subscribers beyond which there was no appeal. India is a mass volume market and this pricing looks to alienate the middle class which is the main category driving consumption.”

“Our strategy is to pack in a lot of premium content such as movies, music, television shows and originals. Secondly we are offering really cool product features such as portability across devices, and even offline viewing which will be a big USP that you don’t have to connect to the internet to access our content,” Deshpande added.

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