 "Netflix may face tough competition, but content volume holds key")
The wait for Indian audiences is finally over as the American content producer and distributor, Netflix, announced its entry into India at the CES 2016 on Wednesday. The over-the-top (OTT) giant announced expansion to 130 countries simultaneously, including India. There are three tiers of pricing available per month — basic at Rs 500, standard at Rs 650 and premium at Rs 800.
Whispers about Netflix entering India had been growing over time and existing Indian players had been priming up for the event, weighing strengths and weaknesses on their part, and more importantly, for Netflix.
Whispers about Netflix entering India had been growing over time and existing Indian players had been priming up for the event, weighing strengths and weaknesses on their part, and more importantly, for Netflix.
Pricing was going to be the main issue, felt industry players, since in India, paying for content online is still very rare.
Drawing parallels from the television broadcast industry, a large part of the country is still in the analogue era of cable and satellite where the average revenue per user (ARPU) hovers around Rs 150 or so. In case of digital cable and direct-to-home (DTH) too, the ARPU is not much higher at around Rs 180-200.
In such a scenario, Netflix would lose the price advantage it had in its home country. In the US, the OTT player provided a value proposition where viewers could access the content they wanted at almost one fifth the rate of cable or DTH.
At Rs 500 a month, Netflix is competing, strictly in terms of subscription rates, with DTH players who provide robust high definition (HD) channel packages. A Tata Sky subscriber for example pays around Rs 605 a month in order to avail the most expensive base pack (Rs 470) along with HD channels (which come at an HD fee of Rs 135 a month).
The most popular OTT app in India — hotstar (operating under Novi Digital, a subsidiary of Star India) currently offers content for free. Hotstar, of course, has a lot of traction coming from its vast sports library, which includes cricket, football, kabaddi, badminton and tennis.
Other players like 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 that the OTT platform has acquired for free.
Where Netflix does have an edge is its slew of original content, an area that Indian players are yet to crack in terms of volume. Experts believe that the American OTT giant has original content that is already known and popular in India and there will be a segment of the audience that is willing to pay for it.
In case of Indian players, only a handful shows like AIB’s series on hotstar and Tanlines on Sony Liv are known and these are currently available for free.
However, this may change with three major OTT players launching in 2016 — Viacom18’s VOOT, Ronnie Screwvala’s Arre and Balaji’s ALT Digital — all promising original content as the focus of their strategy. Eros Now, the OTT platform from film and content producer Eros International, will also launch its original content in the year, as will other existing players.
While the jury is not out on 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 just got steamier.
