Netflix India Needs a Mahabharat Moment
The OTT (Over The Top) services market in India is exploding. In a market predicted to have exponential growth, there have been tremendous changes over the past 15 months. 2016 saw Netflix launched in India, in a global expansion, along with 129 other countries. Amazon too, launched its Prime Video service in India with much fanfare and promises of popular content. The entry of these global giants along with popular homegrown players like Hotstar, Voot & Sony LIV has created a competitive landscape which has left consumers spoilt for choice. The on-demand media industry has seen the same revolution Jio brought to the Indian telecom market. A steep fall in data costs and improvement in average internet speeds has contributed to the growth of these services and perhaps more significantly, a behavioural shift among Indian consumers.
Watching TV as a shared event is ingrained in our DNA across rural and urban India — the Indian family loves to watch movies, sports & soaps as one. The advent of cheap data services and the ubiquity of smart devices has introduced the average Indian to new avenues of media consumption. YouTube has grand plans to double its Indian user base to 400mn — What initially started off as English content went on to Hindi and now has good traction in vernacular languages as well. Recognizing this shift , popular Indian networks like Star India created their own YouTube channels for every channel they broadcasted. With a content library of almost 50,000 hours of content across 7 languages , there was a need for a unified & curated platform with playlists of all this content for user consumption — and thus was born Hotstar.
Hotstar is TV 2.0
Since its launch in February 2015 to coincide with the frenzy of the 2015 Cricket World Cup , Hotstar has swiftly become the first Indian app to cross 100mn downloads. As Star India’s biggest digital initiative, the aim was to change the way Indians consume content. Hotstar offers more than 35,000 hours of content in 7 different languages — promising viewers a big library of movies, television shows and even live sports (cricket, football, tennis and kabaddi).
The Hotstar app is currently free to download and use (ad-supported) with a premium subscription plan priced at Rs 199 per month. The hook of (free) vernacular content has catapulted the app to a user base of more than 63mn users (23mn MAU) who spend close to 31 minutes/day on the app consuming content. This has made the app an attractive property for advertisers attracting advertising revenues of almost 138.5cr (~21mn $) in its first year of operations. Another revenue stream for Hotstar is its premium subscription business — this guarantees subscribers access to American TV shows (including the massively popular Game of Thrones series), blockbuster movies, live sports & some original content. In an exclusive tie-up with HBO, Hotstar gained access to popular content setting it head on with Netflix in a competition for the eyeballs of Indian consumers. But Hotstar has always had an ace up its sleeve.
Cricket. As the most popular sport in India, it also attracts a great deal of investment. Shirt sponsorships and broadcast deals amounting to millions of dollars have been the norm for some years now. As a part of the Star India stable, Hotstar has benefited from exclusive content rights that Star won from the BCCI. A recently concluded match with Australia had 12 million viewers who streamed the match on Hotstar. In addition to this, Star India has won the IPL broadcast and digital rights for a period of 5 years, which will almost certainly attract significant advertising revenues.
With all this content, Hotstar is pretty much the only platform that replicates the experience of conventional cable/DTH TV by offering television staples on a single platform — catering to a diverse userbase. From live sport with friends to a TV show binge-watch in bed or blockbusters on your next commute (with the option of a totally ad-free experience!) — Hotstar is quickly helping Indians cut the cord . Hotstar is TV 2.0.
Amazon’s Proxy War
With 12mn active users (3rd behind Hotstar and Jio Play) , a real conundrum in this market is Amazon Prime Video. Since its entry in India in 2013 , Amazon has pursued a very aggressive expansion strategy. With Jeff Bezos committing $5bn to help Amazon India take the fight to its homegrown rival Flipkart, Amazon India has gone all out in trying to win over the largest share in an e-commerce market slated to be worth $200bn by 2026. Out of several moves that signaled the company’s bullishness on India, perhaps the most impactful one was the entry of its flagship subscription program — Amazon Prime
Priced at an initial promotional amount of Rs 499 for a year (slated to increase to Rs 999) , it has swiftly racked up subscribers in a market that has traditionally been difficult for subscription business models. A third of Amazon’s Indian customer base are now prime members, with an estimated 6 million subscribers at the end of 2016. The value proposition for Prime users is great — subscribe and you get
- Unlimited Free and Faster delivery for Amazon Orders
- Access to Amazon Prime Video & soon to be launched Music
If Amazon’s competitive pricing reels customers in, it is Prime that keeps them hooked. Though it has been a strategy that has cost Amazon billions of dollars , Amazon Prime has irrevocably transformed customer expectations of deliveries and shipping times. After struggling to make a dent in China’s enormous e-commerce market, India has become a priority market, that Amazon is trying really hard to win. This battle with Flipkart has just intensified now that the Indian company has announced a massive funding round from SoftBank.
Across the globe, Prime has been key to Amazon’s growth story and Amazon needs to drive up Prime subscriptions in India to be able to beat Flipkart in its own backyard. Prime Video is critical to this effort. To sweeten the deal for Indian customers, Amazon Prime Video has been investing heavily to create local video content for its Indian audience, and now has a repertoire of original shows and comedy content, as well as movies, thanks to partnerships with leading production houses. Nostalgia is another factor that contributes to viewership and Amazon has tapped into it by licensing popular series like Seinfeld which users will want to keep coming back to. Amazon has recognized the value of content and is ready with its deep pockets to get the Prime juggernaut rolling and maximize its reach — in preparation for the real war ahead.
Can Netflix Chill?
This brings us to Netflix — the 10th largest Internet company by revenue in the world and a darling of pop-culture with the “Netflix and Chill” meme. In a battle for the consumer’s time, it is certainly not having it easy in a highly competitive market, where its subscription numbers are notably lower than the market leader, Hotstar. The biggest reason for this is the steep pricing as compared to its competitors — Netflix subscriptions start from Rs 500 onwards for a month.
In a very Apple-esque move, Netflix is going after the premium segment in India. To differentiate itself highly on quality content and build loyalty in the niches that pay, Netflix CEO Reed Hastings said “There are around 300 million smartphone users in India. But we are targeting mostly the high end — 10 or 20 million — for whom our pricing is not a problem” . This is probably why Netflix’s content carries a certain image. Netflix executives did admit that in order to reach out to the rest of the smartphone users — something clearly on their radar after seeing the massive growth of other platforms — they would have to work on payment plans and durations.
But maybe a page can be borrowed from an earlier chapter in Netflix’s history — it’s colossal growth on the back of House of Cards. Launched in February 2013, House of Cards was one of the first TV shows that was released as an entire season at once. This move possibly led to the one of the earliest instances of the “binge-watch”, a behaviour that all streaming service providers yearn for. What was really unique about House of Cards (other than its gripping plot) was that the political drama launched Netflix’s foray into original content — and its success gave Netflix a lot of clout in Hollywood. Netflix has set aside $6bn for original content , but very little of it has come to India. If Netflix is indeed serious on its growth plans in India, what is needed to fuel this is original content “Made in India and Made for India”. Based on the success of grand shows of epic proportions — Netflix could draw inspiration from one of the first Indian TV shows that captured the fancy of the Indian public back in the early 1990’s — B.R. Chopra’s Mahabharat.
Despite the tacky sets and the over-dramatic acting, the writing and pace of the series is very similar to fantasy sagas that we have now come to love. The plot too was heavily laced with deception and drama that proved to be spellbinding for viewers. With 94 episodes of 45 minutes each, Sunday mornings became synonymous with families getting together and watching the serial. We have all heard stories of empty streets during the telecast and of people with TV sets opening up their homes to the neighbourhood to watch the show together. The show has been dubbed in most Indian languages and has also been telecast on BBC in the UK amassing an audience of 5 million viewers!
TV shows today have fantastic production quality with seasoned movie actors also making the transition to the small screen — certainly there can be a universe where the Mahabharat war scenes are shot by the production teams that created epic battles shown in Game of Thrones? Maybe Amitabh Bachchan can be Bhishma? Perhaps this is the approach Netflix could take to reach out to the Indian masses and maximize its subscription business. Mahabharat comes with the right mix of epicness and nostalgia. Netflix already has a well developed playbook over years of creating this market — maybe it just needs some local flavour (masala?)
With the news of Disney, with it’s deep pockets and widely loved IP , taking its content off Netflix and getting set to launch a streaming service — It is only going to get harder for Netflix in their most profitable market. It is also of note that Disney has a lot of brand recognition in India with a lot of Indians having grown up watching popular Disney cartoons (widely dubbed in Hindi). Disney has already made inroads by acquiring controlling stake in production house UTV in 2012 and producing some Bollywood flicks. Its position is further strengthened by the fact they own uniquely complementary content — Fantasy blockbusters (Marvel Cinematic Universe, LucasFilms) and Sports (ESPN) — both tremendously popular and well-known in India. A similarly priced streaming service on offer, with all this content, could certainly dent Netflix’s ambitions in India. They certainly can’t afford to chill.
