Why did Netflix drop its prices in Indonesia?
This is one of two articles I put together on the same subject to see how AI compares to my own writing. The other article entirely written by ChatGPT is here.
Netflix is the global and regional market leader in streaming video on demand so why is it cutting prices in Indonesia?
On February 21 Netflix Indonesia announced price drops after smartly teasing it for several days. The biggest drop is making the Basic plan Rp65,000 (US$4.25) instead of Rp120,000 (US$7.90) that it has always charged for years. That’s a steep discount of 45%. The other price drop is making the Standard plan 120,000 instead of 153,000, a 21% drop.
Netflix has consistently raised prices in its home market almost annually in recent years so this price reduction comes as a surprise, especially in light of the company’s drive to increase revenue by introducing account sharing fees for anyone who does not live in the same physical location as the primary account holder. Yes, this means any member of the same family who live in a different address, let alone a different city, will have to get their own account or pay a fee to share the same account.
The decision to lower the prices in Indonesia is likely driven by the intense competition in the streaming market in the country. Up until the announcement, Netflix was the only streaming video service that charges more than Rp100k per month for a basic or regular plan.
Disney+ Hotstar charges Rp39k/month or Rp200k for the entire year, HBO GO has a Rp60k/month plan and a Rp99k/3 month plan, Amazon Prime Video, which had an official local push in August last year, cost Rp79k/month (Rp59k during promo period). The local behemoth, Vidio, has probably the widest variety of monthly plans ranging from the basic Rp19k to Rp79k which includes EPL.
By significantly reducing the prices of two of its most popular packages, Netflix is making itself far more attractive to potential subscribers. The company might be hoping that the reduction in revenue per subscriber will be offset by a much larger rise in the uptake of the service.
Netflix announced earlier that the company will be charging for access outside of the account holder’s location. Although it’s only being implemented in a handful of countries right now, the rollout will continue worldwide and the fee for account sharing is almost as much as paying for a separate account.
This new policy is likely going to hit the legally dubious practice of individuals selling account access on social media and ecommerce sites — which cost a fraction of the actual subscription and provides daily and weekly access. It’s very likely that the technical barriers Netflix raised will make this practice more difficult if not impossible. Even for legitimate subscribers on lengthy trips away from home, it’s more hassle to request temporary remote access.
According to research by Media Partners Asia, In January 2021, Netflix was the fourth most subscribed streaming video service in Indonesia. Disney+ Hotstar had 2.5 million, Viu had 1.5 million, Vidio 1.1 million, while Netflix was at 850,000. By May 2022 Disney+ Hotstar had doubled its subscriber base to 5 million while Netflix remains behind in fourth place.
Strangely enough, a Bloomberg report in October 2022 says that Vidio, with 3.5 million subscribers, is the leading streaming video service in the country, also citing the same research company. What happened to the extra 1.5 million Disney+ subscribers they recorded in May?
Vidio’s sudden jump at that time was mainly triggered by the company’s newly acquired streaming rights to the English Premiere League after Mola failed to continue their contract, in addition to the rights to Champions League, Europa League, Formula 1, and the NBA. Vidio would continue to enjoy a significant spike in November and December for winning the rights to show FIFA World Cup.
Meanwhile Netflix is banking on greater acquisition of local productions by signing up renowned action director Timo Tjahjanto for a slate of titles including the action comedy The Big 4 which became a worldwide hit late last year.
The company is also producing several local series including Gadis Kretek, Kecanduan Mantan, Komedi Kacau, and Hari Ini Akan Kita Ceritakan Nanti, and Nightmares and Daydreams, all of which feature A-list local cast members and directors such as Dian Sastrowardoyo, Raditya Dika, Angga Dwimas Sasongko, Joko Anwar, Upi Avianto, Gina S. Noer, and Salman Aristo.
Aside from this slate of big budget local productions as well as further acquisitions of other local titles to draw in more subscribers, coupled with the lower prices and its standard fare of high profile original content, Netflix’s other power card is its growing catalog of Korean dramas, which have helped the company to stave off competition from Viu which used to be the primary destination for K-drama viewers in the country until recently.
Netflix lost more than a million subscribers in the first two quarters of 2022 but a strong slate of titles which saw the company gain 7 million subs by the end of the year might be undone by the new access policy. Perhaps the price drop in Indonesia is a also test in the other direction to see if implementing the combo of account sharing fee and reduced pricing will be the balance the company needs.
