Netflix launches priced service, evokes mixed reactions

Starting at Rs 500, it's the first OTT platform to go completely behind a pay-wall in India

Netflix, the America-based video streaming content producer and distributor giant, announced its entry into India at the CES 2016 meet on Wednesday.

The over-the-top (OTT) entity announced expansion in 130 countries simultaneously, including India, where its service will be available to users starting at Rs 500 a month.

As in the US, Netflix has come to India with a tiered monthly pricing strategy – Rs 500 or the basic pack, Rs 650 for the standard pack and Rs 800 for the premium one. The main difference between the three is the number of people who can use a single subscription and the availability of HD and ultra HD content. Irrespective of the pack opted for, users in India will get a month's free trial on the platform.

Sources in the sector say the price offering is a trial run. “On signing for the service, the customer is asked to provide payment details and choose a pack. The money is deducted later but Netflix has the data on how many people have opted for which tier. Most likely, if the company gets 200,000 customers for the Rs 500 pack, it will continue with this pricing. If not, it might look at offering discounts or reducing the price,” says an executive with another OTT platform.

Will it work?
Whispers about Netflix entering India had been growing and Indian companies had been preparing, weighing strengths and weaknesses. Some believe the pricing that Netflix has entered India with is high. “From our experience here for the past five years, I feel the pricing is expensive for this market. However, we do not know who Netflix is targeting and, in all probability, the company is looking at capturing the top of the pyramid,” says Abhesh Varma, operations head at nexGTV, an Indian OTT entity. Some feel Netflix might help others in the market. "Another way to look at this is that more and more people might actually start paying," says another professional from the sector. This means good news for the likes of Viacom18’s VOOT, Ronnie Screwvala’s Arre and Balaji’s ALT Digital – all promising original content as the focus of their strategy.

Pricing was going to be the main issue, felt sectoral players. For, in India, paying for content online is still rare. Here, Netflix would lose the price advantage it had in its home country, where it provided a value proposition and viewers could access the content they wanted at almost a fifth the rate of cable or direct-to-home (DTH) television. In India, cable ARPU (average revenue per user) is Rs 180 a month or so, a challenge for Netflix.

“We must not forget that the India launch was announced as part of a global expansion, where Netflix has entered 130 new markets simultaneously. From my understanding, the current pricing is in line with their global strategy. Since it is part of a global expansion, the pricing in India would follow their global benchmarks. The good news for Indian players is that it now opens avenues to go completely paid,” says Uday Sodhi, executive vice-president and business head–digital, Sony Pictures Entertainment (earlier called Multi Screen Media) and Sony Liv.

What they charge
At Rs 500 a month, Netflix’s pricing is at par with DTH players, who provide robust high-definition channel packages. A Tata Sky subscriber, for example, pays Rs 605 a month for the most expensive base pack (Rs 470), along with HD channels (which come at Rs 135 a month). No other OTT entity currently charges for accessing any and all the content on its platform.

The most popular OTT app in India, hotstar (operating under Novi Digital, a subsidiary of STAR India), offers content for free. Hotstar has a lot of traction from its vast sports library which includes cricket, football, kabaddi, badminton and tennis. Others such as Eros Now, Hungama, Sony Liv and Spuul have a ‘freemium’ model where some content is free, while some exclusive content is available for a fee. In most cases, the money charged is for movies the OTT platform has acquired for a fee.

Where Netflix does have an edge is its slew of original content, an area Indian players have yet to crack in terms of volume. Experts believe the American OTT giant has original content that is already known and popular in India and there will be a segment of the audience willing to pay for it. In the case of Indian players, only a handful of shows like AIB’s series on hotstar and Tanlines on Sony Liv are known, and these are currently available for free.

Ahead
The catch here is that the content available to Indians on Netflix are still largely the international titles the platform has. Sodhi says this could change over time; providing local content for a foreign company is not easy. “For now, their focus seems to be the viewers who want to see international content,” he believes.

While it is yet to be seen how viewers will react to Netflix’s Rs 500 a month subscription fee, one thing is for sure -- competition in the online content distribution space has got steamier.