Netflix India’s dependence on Reliance Jio

The following is Netflix’s pricing plans in India

Netflix Pricing Plans India

Netflix prices its product similar to what it charges customers in the U.S is what most reports say. Most reports highlight that this is high because the average cost of the alternate services is around Rs 300 for a normal DTH subscription.

I believe that the actual cost of a Netflix subscription is India is at Rs 1500.

This is because most Indians don’t have a broadband unlimited connection. And it just doesn’t make sense for someone to use Netflix on a limited internet connection. When each episode stands at 500 Mb, by 10 episodes you have pretty much exhausted your 5 GB pack.

In India, as is everywhere else, most mobile internet packs have are limited data ones. It’s highly expensive to take an unlimited wireless pack so consumers who want an unlimited pack generally use a broadband or wired connection for their home PC.

The number of wired connections in October 2015 was a low 16.27 Mn subscribers(India’s total Internet users is at 400 Mn) . Out of these, most would still be on a limited data pack. If I were to take a guess, I would say around 10% could be on an unlimited data pack. That makes 1.6 Mn subscribers.

For these 1.6 Mn subscribers, the cost of Netflix is Rs 500. One way Netflix could go about is target only this customer segment. But that would be a bad business strategy for a country of a billion.

For users who are not an unlimited data pack, who want to be able to use Netflix, the users have to upgrade to an unlimited data pack. For these consumers, they have to bear the additional cost of improving their broadband plan. And for consumers who are not on broadband, they have to get broadband installed and apply for a decent plan. I have taken this cost to be Rs 1000 for a decent unlimited connection, however it is going to be much higher.

Airtel Broadband Tariffs -Mumbai
Tikona Broadband Tariffs

These tariff prices show that the cost of Broadband for a connection with speed above 4 Mbps and Data usage of more than 60 GB is around Rs 1500.

Hence, it makes more sense for any consumer to continue with his normal internet pack (most probably with the limited data pack on his phone) and continue with the DTH Tv.

Whatever Netflix does, how much of original programming it creates, how much of content it displays on its platform, it will not get away with charging a customer Rs 1500 p.m while an alternative is available at Rs 300 p.m

So what can Netflix do?

Enter Reliance Jio.

Reliance Jio is an upcoming provider of mobile telephony, broadband services, and digital services in India. Its the brainchild of Mukesh Ambani, India’s richest man who has backed the project with a $17bn investment.

Jio’s core product is 4G services with peripheral services like like instant messaging, live TV, movies on demand, news, streaming music, and a digital payments platform. Jio is currently in a beta period and is expected to go live by March 2016.

Jio’s is expected to disrupt the telecom market and shift users to 4G at an exponential pace. The supposed pricing and tariffs are 5x cheaper than the competitors and is expected to have a better reliable service as infrastructure is backed by expensive investments across fiber and wireless networks.

Image source :http://telecomtalk.info/reliance-jio-internet-plans-at-rs1/126711/
The ‘FTTH FIP Alpha Offer’ plan is claimed to offer Fibre to the Home (FTTH) connection with a speed of 100Mbps with a usage quota of 100GB and free On-Net usage discount. This plan will offer validity of one month and the package box will include the Router Gateway, Router Drop Cable, Wi-Fi, and Ethernet.

This pricing is a suspected pricing info from insiders but even if 100GB quota is offered at Rs 50 and at a 100Mbps speed, there is no doubt that the market is going to be disrupted. Jio is expected to launch pan nation with the same prices(The tariff for 1GB 2G is Rs 100 and Jio is expected to provide 1GB 4G at sub Rs 100). If that happens, India will skip the 3G generation and port from 2G to 4G directly.

If Jio offers unlimited data at cheaper rates, that’s when Netflix becomes a viable option for the millions of users. That’s when Netflix’s pricing of Rs 500 p.m is actually competing with DTH services of Rs 300 p.m

Partnership with Jio?

If Jio wasn’t pushing its agenda of streaming media through its own Jio platform, Jio would be a perfect partnership for Netflix. Jio would be the telecom disruptor and Netflix would be the accompanying media disruptor.

However, Netflix should strive to partner with Jio as this is a rare chance to grow exponentially that its not going to get again with traditional advertising. A 6 month free subscription with every Jio subscription might force Jio users to download Netflix and test out its features. This would be a highly targeted campaign cause in the end, these are the users who can actually afford Netflix.