Global streaming giant Netflix’s decision to introduce an ad-supported tariff plan could open the platform to a gamut of new subscribers in India, say experts.

During the post-earnings call on Monday, Netflix co-CEO Reed Hastings said,  “I’m a big fan of the simplicity of subscription. But as much as I’m a fan of that, I’m a bigger fan of consumer choice and supporting consumers who would like to have lower prices and are advertising-tolerant to get what they want.”

The company will figure that out over the next year or two, he said, adding, “Think of us as quite open to offering even lower prices with advertising.”

Falling subscriber base

This comes even as Netflix has seen its stocks fall by 27 per cent after it reported a decline of nearly 200,000 subscribers in the January-March quarter. It is also predicted that Netflix will lose an additional 2 million subscribers in Q2 CY22.

While Netflix did not specifically mention India when citing reasons for the first subscriber plunge for the company in a decade, in its January earnings call, Netflix had admitted that India is a tough country to crack.

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Being a major growth frontier, capturing subscriber and revenue growth in India will be extremely important for the streaming giant. Netflix slashed its prices significantly in December last year in a bid to bump subscriptions.

Revenue maximisation

Regarding the revenue accretive effects of this move, Gregory Peters, Chief Operating Officer and Chief Product Officer, said, “This was a bet in terms of long-term revenue maximisation, which is how we think about the top level, the valuatory model we have for these things.” 

In addition to introducing lower priced plans with advertising, Netflix also wants to double down on its strategies for gaming.  

Experts believe that Netflix’s move to introduce ads in their lower-priced plans will be a good move for the Indian market, adding that after December price cuts, Netflix prices are comparable with other OTT players and the only route to growth is to start offering ads.

Karan Taurani of Elara Capital said, “Since these markets are price sensitive, the only other route to grow is AVOD (advertising video on demand); the company has plans to introduce AVOD over the medium term and we believe the freemium model augurs well for emerging nations, including India, over the longer term.”

Jehil Thakkar of Deloitte India however, warns, that Netflix might need to start rethinking its definition of growth, especially since growth in revenue might not be directly correlated with growth in subscribers.

“Moves such as introducing cheaper plans with ads, interest in gaming and cutting tariffs are all geared towards cultivating a subscriber base for the company. The company will also be thinking about monetising this,” Thakkar said. 

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