Netflix said on Wednesday that it will roll out a cheaper subscription plan in India, one of the last great growth markets for global companies, as the streaming giant scrambles to find ways to accelerate its slowing growth worldwide.
The company added 2.7 million new subscribers in the quarter that ended in June this year, it said today, far fewer than the 5 million figure it had forecasted earlier this year.
The company said lowering its subscription plan, which starts at $9 in the U.S., would help it reach more users in India and expand its overall subscriber base. The new plan will be available in India in Q3. According to third-party research firms, Netflix has fewer than 2 million subscribers in India.
Netflix started to test a lower-priced subscription plan in India and some other markets in Asia late last year. The plan restricts the usage of the service to one mobile device and offers only the standard definition viewing (~480p). During the period of testing, which was active as of two months ago, the company charged users as low as $4.
The company did not specify the exact amount it intends to charge users for the cheaper mobile-only plan. During the testing period, Netflix also provided some users the option to get a subscription that would only last for a week. The company also did not say if it intended to bring the cheaper plan to other markets. TechCrunch has reached out to Netflix for more details. (Update: Netflix declined to elaborate at this point.)
“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),” the company said in its quarterly earnings report.
The India challenge
Selling an entertainment service in India, the per capita GDP of which is under $2,000, is extremely challenging. The vast majority of companies that have performed exceedingly well in the nation offer their products and services at a very low price.
Just look at Spotify, which entered India earlier this year and for the first time decided to offer full access to its service at no cost to local users. Even its premium option that features playback in higher quality costs Rs 119 ($1.6) per month.
That’s not to say that winning in India, home to more than 1.3 billion people, can’t be rewarding. Disney-owned streaming service Hotstar, which offers 80% of its content catalog at no cost, has amassed more than 300 million monthly active users. There are about 500 million internet users in India, according to industry reports.
In fact, Hotstar set a global record for most simultaneous views to a live event — about 25.3 million users — during the recently concluded ICC cricket world cup. It broke its own previous records. Hotstar’s free offering comes bundled with ads, while its ad-free premium option costs Rs 999 ($14.5) for year-long access.
Amazon, another global rival of Netflix, bundles its Prime Video streaming service in its Prime membership, which includes access to faster delivery of packages and its music service, for Rs 999 a year.
For Netflix, the decision to lower its pricing in India comes at a time when it has hiked the subscription cost in many parts of the world in recent quarters. In the U.S., for instance, Netflix said earlier this year that it would raise its subscription price by up to 18%.
During a visit to India early last year, Netflix CEO Reed Hastings said the country could eventually emerge as the place that would bring the next 100 million users to his platform. “The Indian entertainment business will be much larger over the next 20 years because of investment in pay services like Netflix and others,” he said.
So far, Netflix has largely tried to lure customers through its original series. (Many popular U.S. shows such as NBC’s “The Office” that are available on Netflix’s U.S. catalog are not offered in its India palate.) The company, which has produced more than a dozen original shows and movies for India, this week unveiled five more that are in the pipeline.
“We are seeing nice, steady increases in engagement in India. Growth in that country is a marathon and we are in it for the long haul,” Ted Sarandos, chief content officer at Netflix, said during an earnings call today.