Netflix, the global streaming giant, has just had its worst quarter ever. The company lost as many as 130,000 subscribers in the US, possibly because of the increase in subscription costs which happened earlier this year. But it is not just a US-centric issue. The streaming service added 2.7 million new subscribers in the quarter ending June, a number significantly lower than the 5 million new subscribers forecast for Q2 2019.
Netflix remains adamant that competition from other streaming services globally, including the international players as well as local streaming platforms, has nothing to do with the slowdown in growth. “Our missed forecast was across all regions, but slightly more so in regions with price increases. We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions,” says Reed Hastings, CEO, Netflix. And the company believes it will clock as many as 6.2 million new subscribers in Q3 2019.
One of the reasons for this slowdown in the US could be the fact that popular shows such as The Office and Friends exited Netflix in the same quarter. And that could now become a recurring theme for the streaming giant, as companies that own rival streaming services would want to pull some of their content from Netflix. At the same time, Netflix is splashing the cash on original content. In fact, the streaming service hopes to be able to bounce back with the return of the latest season of Stranger Things. “We’re building amazing capacity for content. Our product has never been in better shape,” Hastings told the press. Netflix spent more than $3 billion on original programming in Q2 2019.
Competition is coming too. Apple is set to roll out the Apple TV+ streaming service later this year, and so Disney’s Disney+.
And that is where India gains even more importance for Netflix. While the company doesn’t give individual number of subscribers for each country, it is important to note that new subscriptions in India is critical for Netflix. This is still one of the untapped markets for the streaming service, because there is a lot of scope for growth. Subscription prices are something that the Indian market is very price sensitive about. Which is exactly why Netflix has reportedly tested a lower price subscription plan and is now ready to roll it out for the masses. And India is a market that will only grow in the coming years. According to accounting and consultancy firm PricewaterhouseCoopers, India’s video streaming industry will be worth Rs. 11,977 crore by the year 2023. The numbers are a part of the Global Entertainment & Media Outlook 2019-2023 (Outlook) report released in June.
“After several months of testing, we’ve decided to roll out a lower-priced mobile-screen plan in India to complement our existing plans. We believe this plan, which will launch in Q3, will be an effective way to introduce a larger number of people in India to Netflix and to further expand our business in a market where Pay TV ARPU is low (below $5). We will continue to learn more after launch of this plan,” said Reed Hastings, CEO, Netflix during the earnings call. However, if we are to go by what Netflix has hinted at, the new plan could very well be priced just under the $5 price point, which would roughly translate to around Rs 300 per month or lower. Could we also see annual subscription options too now?
But a quick look at the landscape does show the challenge that awaits Netflix.
There is Amazon Prime Video, which is also Netflix’ global rival. You can get the access to Prime Video for as little as Rs 129 per month or Rs 999 per year. And it is not just that, because bundled with the same subscription is access to Prime Music, Prime Reading, more rewards with the Amazon Pay ICICI Bank credit card and faster shipping benefits every time you shop on Amazon.
Then there are the Indian players. Hotstar offers Hotstar VIP at Rs 365 per year and Hotstar Premium plan priced at Rs 199 per month or Rs 999 per year, and this includes content from Hooq as well as Showtime and HBO. It is expected that the Disney+ content will be available on Hotstar in the coming months, something that will drive up the value of this subscription.
Sony Liv charges Rs 499 per year Premium and Zee5 which costs Rs 999 per year for the All Access Pack. And then we have to factor in the likes of Voot and Jio Cinema, Eros Now, Hungama, Spuul, Viu and Alt Balaji, and the entire landscape is full of stiff competition for Netflix—also because each of these platforms have their own unique positioning more often than not, which helps adoption.
With this new plan, Netflix will have to give up the premium positioning. But its success will depend on how much ground Netflix is willing to concede.