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Round 2
2. Presentations will be held at IMT campus on 23rd October 2016. Students are required to report
to the campus help desk by 9 am.
3. Time allotted for presentation is 7 minutes, which would be followed by a 3 minutes question
session by the judges.
and/or
document
should
be
Netflix in India
Netflix Inc. (marketed and stylized as NETFLIX) was an American multinational entertainment
company founded on August 29, 1997 in Scotts Valley, California by Reed Hastings and Marc
Randolph. It specialized in streaming video on demand, both online and offline.
In 1998, about a year after Netflix's founding, the company started sending DVD by mail as their
core business. In 2007, Netflix expanded its business with the introduction of streaming media,
while retaining the DVD and Blu-Ray rental service. In 2010, Netflix expanded beyond the US
market and made streaming available in Canada. As of 2016, Netflix served over 190 countries. In
2013, Netflix introduced itself to the film and television industry, with its first series being House
of Cards debuting in the same year. It greatly expanded into the film business as well in 2015,
and now offers its "Netflix Original" content through its online library of films and television.
Netflixs revenue model was very unique. Basically, they followed a subscription revenue model.
This was taken well by many customers in United States as the online portal was ad-free, as
compared to other content providers, which showed ads even for subscribed customers. As a
result, customer satisfaction levels in United States was very high. Netflix was the market leader
in the Video On Demand (VOD) segment in the United States (Exhibit 1). A study conducted by
the NPD group in 2016 revealed that approximately one in every four households in U.S
subscribed to Netflix. Unlike other portals, Netflix only asked you to pay on a per month basis. If
you did not want to renew your subscription, you did not have to. At a later point in time, if you
wanted to restart your subscription, you could do so by paying for a month again. This was
different from other portals which asked for a 3-month or 6-month subscription up front. This
found favor with customers, and was one of the reasons why Netflix did so well in the USA
In January 2016, Netflix launched operations in 129 countries in a single day as part of their global
expansion strategy. This came as a surprise to fans all over the globe. However, the situation
currently was not going as planned, for Netflix. Due the last quarter earnings, Netflix reported
good international growth results in the first three months of 2016. But the company's outlook
for the second quarter did not go well with investors. Netflix stocks tanked after its forecast for
Q2 international-subscriber growth was way below Wall Street targets.
Netflix did not focus on country specific strategies while expanding. They had one global strategy
in pricing and content. This backfired in countries like Russia where only 5% of the country speaks
English (according to a 2010 census). Netflix never focused on local content due to which they
couldnt attract as much viewership in various countries as they had initially expected. Also, the
subscription prices were perceived as high, especially in developing markets. Netflix did not take
into consideration the payment processing methods in different countries. For e.g. in some
countries people didnt own credit or debit cards. Also, due to poor broadband infrastructure
online payment or proper viewing experience was not possible.
As of July 2016, Netflix reported over 83 million subscribers worldwide, including more than 47
million in the U.S. Netflix boasted of having 42% viewership outside USA. Netflix was the clear
leader in the US at the moment, holding 36% of the market share according to a GeekWire report
based on the final quarter of 2014. This dwarfs Amazon's 13% share and Hulu Pluss 6.5%.
However, Amazon is quickly gaining ground. Check exhibit 2 for US competitor prices.
With rise in demand of VOD all over the globe, Netflix target market will only increase with time.
According to CISCO VNI report 2014, video and audio will consume 89% of Consumer internet
data traffic by 2018 (Exhibit 3).
In India, some of the features offered by Netflix are given below
High quality content: -American TV shows and access to classic movies in HD and UltraHD.
Original content exclusive to Netflix
Lot of options in pricing: - Three different plans starting from Rs.500 to Rs.850 with free
one-month subscription
Different Platforms: - PlayStation, Apple TV, Smart TVs, PCs, Android, Xbox
Adapts the data rate of the video stream to meet the bandwidth available to a user for
smooth streaming
Competitors in India
1)Hotstar - Star group's app Hotstar was targeted for users watching live sports, but it lets the
viewer stream a wide range of TV shows and films as well. It has a fairly big collection of TV shows
and films that you can watch for free on its website without signing up, and on your smartphone
via its Android and iOS apps. Apart from English and Hindi, Hotstar has content in various regional
languages as well.
Hotstar had added an ad-free premium subscription with several shows such as Game of Thrones
being available as soon as they were aired in the US. They had tied up with the IPL, which is Indias
most watched cricket league, with viewership from all over the globe. Hotstar currently has 10
times more subscribers than Netflix. Look at exhibit 12 for Hotstar advertisements.
2)Spuul - Spuul was one of the first players to enter the video streaming business in India. Spuul
does not have English language content, but lets viewers watch some films for free without
registration. A subscription fee of 150 per month lets viewers access its entire catalogue on the
website and app. However, viewers can find plenty of recent Hindi films in the free catalogue as
well.
3)Voot - Viacom18's newly launched video streaming service - Voot - is free and has a fair
collection of new movies which is not always the case with video streaming services. Its collection
contains several movies currently screening on Television. Along with local content it has a fair
collection of international movies. The service also lets viewers watch popular TV shows such as
Big Boss and Balika Vadhu, apart from some original TV series.
4)Hooq - Hooq has a fairly large catalogue of films and TV shows, which features Doordarshan
classics such as Nukkad. Hooq's UI is user-friendly. It has a free 14-day trial after which viewers
will have to pay Rs.199 per month.
Check exhibit 4 for prices.
India is an extremely cost conscious market and has high data costs. This added up to high
subscription prices. Hence, Netflix found it difficult to sell. All their competitors were providing
similar services at relatively lesser prices. And also there was very limited amount of domestic
content with a small collection of Bollywood movies and very few South Indian movies. Netflix
had not yet signed up any of the local TV shows to be broadcasted in their portal. Indian users
were forced to use different VPNs or torrents to access content as there was limited access.
In India the consumers pay higher data charges as compared to many other countries in the
world. High Definition videos lead to high data consumption increasing the cost. People usually
sign up on Netflix to make use of the first month free subscription, but do not renew.
In India, viewership share of English general entertainment and movie channels is less than 1%.
In India, families tend to sit down and watch TV together, and there are social stigmas which do
not encourage a lot of intimate scenes or sexual content. The content in Netflix were mostly for
viewers above 18, thus not making it a good choice for home television viewing, mainly because
it was not censored. Netflix with almost no substantial local content, is not able to attract
considerable number of viewers. In India, as well as in many countries, Netflix did not advertise
its arrival at all, and had no branding strategies in place. This made it difficult to make customers
aware of Netflix, and to win the consumers in a market like India. Their biggest competitor
Hotstar had many advertisements and local brand ambassadors to add value to their content
(Exhibit 12). 6 months into the market, Netflix never really made a huge impact on the Indian
market.
However, with the torrent sites being blocked in most of the countries including India, it is an
opportunity for sites like Netflix to cover ground. Important torrent sites like Kickass, Piratebay
and Torrents.eu are already blocked. Their owners were either caught or are on the run. This
critical time should be utilized by Netflix to make changes in their approach and capitalize on the
situation.
Questions:
Is India a potential profitable market for Netflix? Justify with relevant data
If yes, will a subscription revenue model work in a market like India. Assume you are the
head of Netflix India what changes would you make, and what would the implications
of those changes be?
If no, justify with relevant data, on future course of action for Netflix.
Do you foresee any legal, regulatory or cultural issues which may prevent Netflix from
taking off?
Is Netflixs global image enough to sustain in a market like India, without the need for a
dedicated marketing campaign?
If yes, justify the reasons why Netflix has not been doing well and the strategy to boost
membership.
Subscription prices
Hulu plus
$8 per month
Amazon prime
Subscription prices
Content
Hotstar
Spuul
Hindi movies
Voot
Price: Free
Hooq
Population
All ages
1210854977
0-4
112806778
5-9
126928126
10-14
132709212
15-19
120526449
20-24
111424222
25-29
101413965
30-34
88594951
35-39
85140684
40-44
72438112
45-49
62318327
50-54
49069254
55-59
39146055