Why Netflix struggles to crack the Indian market

Vandana Sinha is down with a bout of Netflix fatigue. Two years ago, the OTT platform had opened a whole new world of Korean cinema for the 57-year-old homemaker from Delhi. But increasingly, she finds herself looking for something more homegrown. “Unlike some other services, I don’t find as many local shows or movies as I’d like on it. The international content is great but the variety isn’t much,” Sinha said. The platform doesn’t offer her value for money, she said, and a subscription seems pointless on some days.

Does Netflix know what the Indian consumer wants? The platform curates some of the best content from the rest of the world but isn’t the destination for compelling Indian originals. Its strategy in India, a market it has self-admittedly not been able to crack, has come under scrutiny in the last few years. “The thing that frustrates us is why we haven’t been as successful in India, but we’re definitely leaning in there,” said Reed Hastings, co-founder and chairman, during an earnings call this January. Only a month before, in December 2021, Netflix had slashed rates by 18-60% across plans in India to draw a wider audience —some of its 60-odd competitors even now offer annual plans cheaper than its monthly subscriptions. It isn’t a surprise, therefore, that at 5 million paid subscribers, it is far behind market leader Disney+ Hotstar (50 million) as well as Amazon Prime Video, which has crossed the 20 million mark. It fares better when it comes to revenue share—20%, same as Amazon’s – but that might not be sustainable.

So, what is holding back Netflix in India? Analysts and industry insiders point to three broad issues. Pricing that puts it out of the reach of most subscribers, especially those in small towns; content that speaks mostly to a premium clientele—and, lastly, a crisis of leadership.

Uneasy at the top

Over the past several months, the company has seen an exodus of several senior executives. Those who have moved on include Srishti Behl Arya, director, international original film, Aashish Singh and Abhishek Vyas, both directors of original film, Swati Mohan, director of marketing, and Divya Pathak, director of publicity —all with solid experience in the Indian film and television industry or digital media and advertising. (Behl Arya is now CEO at movie production house Phantom Films, Vyas founded a company called AVS Films in Dubai, while Singh has moved on to south Indian production house Lyca Productions. Mohan is now strategic advisor to health and financial tech companies.)

“They were brought in to capitalize on their existing networks and relationships within the industry, to commission projects better and faster than rivals,” said a senior executive at a rival platform. “But, ultimately, they were never given the freedom to do anything disruptive.”

Behl Arya’s tenure saw high-profile partnerships such as the one with Karan Johar’s Dharmatic Entertainment. But most of these didn’t yield results. Shows like Ajeeb Daastaans, Guilty, Searching for Sheela (all co-produced by Dharmatic) or AK vs AK and Selection Day (co-produced by Anil Kapoor) seemed to reflect a typical strategy of foreign OTT platforms—to collaborate with upmarket, high-profile and seasoned names in India. But it is no longer possible to dazzle younger Indian audiences by big names. It is innovative concepts and ideas they want—the success of content produced by non-mainstream players like The Viral Fever or Raj Nidimoru & Krishna DK (best known for Amazon’s The Family Man) is ample proof of that.

The current Netflix team—Monika Shergill, vice-president of content, Tanya Bami as series head, Pratiksha Rao as director, original films and licensing, among others—also works with much less autonomy than is ordinarily given to local market heads, the person said.

The only mandate given to them over the past few years has been to emphasize on glitz, glamour and what may be deemed “bold” subjects from an Indian lens —such as homosexuality. “But how many Indians would identify with a Fabulous Lives of Bollywood Wives?” the executive said.

There is also a culture of indecisiveness, trickling down from the top, the person said, where mandates given to production houses are changed frequently, scripts tweaked and schedules thrown off gear, leading to chaos and increasing costs. The prequel to Baahubali, which Netflix announced in 2018, has been shelved owing to just this kind of confusion, say industry experts. Netflix, however, denies the film has been dropped. Several high-profile Bollywood names are allotted big budgets without vetting their pitches and scripts.

Sources close to the company, however, disagree, calling investment decisions a combination of what the creative dictates and what the size of the audience is. Pitches are received from both renowned and up-and-coming creators and while some make it to development, others don’t.

“The absence of a clear country head is costing them deeply and frequent exits lead to loss of confidence,” the streaming platform executive added. “There is also a sense of panic in the company and people are looking to make scapegoats of others.”

Those familiar to goings-on inside Netflix, however, say it has a performance-driven culture and exits are a result of people finding better opportunities. But the firm’s structure also demands that each functional head in India communicate more with counterparts in the subcontinent and the rest of the world than with other teams and departments in their own country. “That may be the American way of working but they can’t assume India to be the same,” said a media analyst who did not want to be named.

How it began

“When they started out in India, there was a very clear thought that they weren’t going after all of the country but a niche, premium market,” said a second media analyst on condition of anonymity.

At some point, the niche turned out to be too small a segment, the person said, and subscriptions started plateauing after 3-4 million. Media industry experts estimate that Netflix had exhausted the top tier of the Indian audience segment.

Globally, too, Netflix is in trouble. The platform saw net additions across the world decline by more than 50% to 18 million in 2021, compared to 37 million in 2020. In countries like the US, there has been massive pressure over the past two to three years from competitors like Hulu, Disney+, HBO Max, Peacock, and behemoths like Apple and Amazon. “And so, it is looking towards India for topline subscription growth and needs to be more aggressive in its strategy,” the analyst mentioned above said.

The first course correction in terms of pricing came in July 2019, when it introduced a mobile-plan for India, then priced at ₹ 199 per month. Even as far as distribution partnerships go, the company lagged behind, preferring stand-alone subscriptions that it continues to derive significant revenue-per-user (RPU) from. It tied up with telecom and other aggregators like Reliance Jio and Tata Play as late as post the covid-19 pandemic. After the latest price cuts, Netflix is still priced at ₹ 149 for its mobile-only plan, and the basic, standard and premium plans come for ₹ 199, ₹499 and ₹649 per month, respectively. In comparison, Amazon Prime Video is priced at ₹1,499 for a year and includes music and shopping benefits. Disney+ Hotstar offers four plans—super ( ₹899), premium ( ₹1,499), both annual subscriptions, and mobile options ( ₹299 per year or ₹49 per month).

Amazon and Hotstar have taken different approaches in India, which have paid off. The latter has bet on sports, bagging rights to stream the popular IPL (Indian Premier League) tournament, among other properties. The former began acquiring mass-market Hindi films much earlier, and in greater numbers, forging partnerships with producers like Sajid Nadiadwala, Aditya Chopra, and Salman Khan, among others. Amazon’s web show properties have also managed higher recall—be it Mirzapur, The Family Man, Four More Shots Please! or Made In Heaven. It’s hard to think of a Netflix show that is in a similar league.

To be fair, Netflix has been around for about six-and-a-half years in India. It dove deep into local programming only three years ago and nearly 70% of its India team has been built during covid. It is betting on price cuts and a broader range of content that is now becoming available. “Our long-term strategy in India is to grow member engagement, revenue and attract new members. We’re doing well across all three and are committed to investing and growing in the country,” a Netflix spokesperson said in response to Mint’s queries.

Stories from India consistently feature in the Global Top 10, from originals such as Minnal Murali and The Fame Game, to licensed films such as Sooryavanshi, Beast and most recently Gangubai Kathiawadi, the Netflix spokesperson added. According to App Annie, in India, Netflix app installs have grown by 150% since December 2021.

Think ‘single-screen’

Despite the churn in Netflix strategies since 2019, it hasn’t found its feet. “It didn’t expect that it would have to compete with the MX Players of the world. More mass-market is not something they want to do. They haven’t really made the mental transition to catering to a ‘single-screen audience’ (as opposed to a more urbane, smaller multiplex cinema audience),” the first analyst pointed out.

Acquiring titles like Sooryavanshi, RRR and Gangubai Kathiawadi, as it has over the past few months, might be a step in finding a way to reach out to that audience. But several industry experts say Netflix is mistaken to think that big is necessarily better. “They think that working with big Bollywood names like Karan Johar and Excel Entertainment or picking up a film like RRR will work. That’s just a lazy approach. You need things that are meaningful to people individually,” the executive at a rival streaming platform said.

Only the biggest Bollywood brands matters in this game, said the founder of a regional OTT platform, though Netflix saw 20 directors make their streaming debuts in India last year. “Independent filmmakers are asked to get a star or known name on board to even initiate a conversation with the platform. Pitches are not even given a hearing until high-profile presentations are made, costs of some of which are unaffordable for new directors. That is when these newcomers come to us, to pitch their scripts,” said Akshay Bardapurkar, founder of OTT platform Planet Marathi.

Netflix’s India originals reflect a commissioning strategy that cannot think beyond the repetitive cocktail of glitz, glamour, nudity and explicit language, said the executive cited earlier. The few shows that do seem to resonate with common Indian sensibilities such as Jamtara- Sabka Number Ayega or The Kota Factory have been acquired by the company from entities such as Viacom18’s Tipping Point Studios and TVF (The Viral Fever). There has also been little exploration of content in non-Hindi languages other than from the south, which is a low-hanging fruit given the talent, scripts and audience base available.

The road ahead is likely to be tougher for Netflix. It cannot slash prices any further and out-of-home entertainment options like movie theatres have started opening up. “I’m still rooting for their roster of international content. But their big ambition to grow the subscriber base can only be achieved if they go back to the drawing board,” the first streaming platform executive said.