Here’s How Netflix Is Looking To Drive Growth In India

by Trefis Team
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As growth in the domestic market stagnates,Netflix‘s (NASDAQ:NFLX) international segment is crucial for the company’s long term growth. According to our estimates, by the end of our forecast period, the international streaming segment will contribute more to the company’s overall revenues (~ 52%) than the U.S. business.

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India holds strong potential for streaming media players. Estimates suggest that the country will have 500 million smartphone users and 650 million internet users by 2020. As demand for entertainment content grows rapidly in the country, streaming players could witness significant growth. Amazon Prime Video currently seems to have the upper hand in India, with its focus on local content and mobile based solutions, but it appears that Netflix is working on initiatives to compete aggressively with Amazon in the region.

Focus On Technology To Capture The “Mobile First” Economy

India is one of the top three markets for Netflix in terms of mobile usage. However, internet speeds on mobile phones in the country are relatively slow and data costs are high. This discourages many users from streaming high quality videos on their smartphones, and the constant “buffering” due to low speeds frustrates users. Netflix is using its “Open Connect Servers” to resolve this issue. By placing Open Connect Servers closer to users, the company can offset long distance network congestion, making streaming faster and better in quality. Further, the company is working on video formats where subscribers can stream videos at any bit rate which can allow for minimal data consumption. This innovation could make Netflix very appealing to many mobile users in India who shy away from streaming videos on their phones due to high data charges.

Higher Investment In Local Content

Reports suggest that Netflix is likely to spend nearly $300 million on India focused content in an attempt to lure users. This is much higher than Amazon’s $75 million investment in local content. When it launched in India, Netflix was looking to capture viewers who were interested in content that was primarily from countries such as the U.S. and the U.K., and did not invest significantly in local content. This strategy limited the company’s growth in India to an extent. On the other hand, Amazon has focused on regional content and has an estimated 9.5 million Prime Video subscribers in the country since its launch just 6 months ago. Netflix, despite being in the country for longer, had only 4.2 million subscribers in the region as of January. A focus on local content can help the company change this dynamic and attract more users. Netflix is launching its first India-specific comedy soon, and is partnering with production companies in India to gain exclusive rights for streaming popular movies.

Netflix appears to be gearing up to compete aggressively with Amazon in India’s high-growth streaming market. However, its subscription rates are also higher compared to Amazon in the country, which is likely to be another obstacle for the company in a relatively value-conscious market. India is an important market for the company to drive growth for its international segment, and as it works on content and technology to lure users, economies of scale should enable the company to offer its services at more competitive rates.

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