Netflix Girds for Price War in India Streaming Battleground

Mobile is most popular way to stream TV, films in India but telecom tariff rate hikes may leave some with less to spend.

By P R Sanjai, Bloomberg | Updated: 24 December 2019 10:13 IST

Netflix Girds for Price War in India Streaming Battleground

India's big three telcos hiked data tariffs by as much as 41 percent earlier this month

Highlights

Cheap broadband, vast audience make India a lucrative streaming market
Netflix has set a target of 100 million subscribers in India
Increase in data cost, economic slowdown can hurt Netflix's aspirations

Netflix and its rivals are facing a price war in India as a jump in the cost of watching video on mobile phones threatens to slow demand in what is shaping up as a key growth market globally for streaming.

The country's three wireless carriers hiked data tariffs by as much as 41 percent earlier this month, leaving some customers in India, where most streaming is done on phones, with less to spend on entertainment services like Netflix, Apple's TV+ service - which debuted there last month - and those of local competitors.

Cheap broadband, a well-established film culture and a vast English-speaking population have helped make India a lucrative streaming battleground, with Netflix targeting 100 million subscribers in the country, almost 25 times the customer base as of this year. But an increase in data costs, coupled with a wider slowdown in the economy, could make customers more sensitive to how much they pay for content, just as players like Apple and Amazon's Prime try to dig a foothold in the market.

"This is a challenge that will affect growth, as the mobile data boom has been a big factor driving adoption in India," said Utkarsh Sinha, managing director of Bexley Advisors, a boutique investment bank focused early-stage deals in tech and media. "The Indian user has largely used data like running water without thought."

Netflix is already trying to get ahead of the move, slashing prices by as much as half for subscribers that commit to at least three months. Most of the country's streaming services, including Apple TV+, Amazon Prime and Walt Disney's Hotstar have also offered discount deals this year and subscriptions at prices well below those in other markets. Apple's new TV+ service, for example, sells for about $1.40 (roughly Rs. 100) a month in India, compared with about $5 (roughly Rs. 360) in the U.S. and Japan.

Netflix said in a statement that its users may value the flexibility that comes from being able to pay for a few months at once. "As always, this is a test and we will only introduce it more broadly if people find it useful," a spokeswoman in India said. Representatives for Amazon, Apple and Hotstar in India declined to comment.

"As all platforms become equally competitive on content, pricing will be a key lever to pull to draw in customers and encourage churn," said Sinha. "Netflix has introduced an India-only price, and Amazon is already subsidizing its Prime offering through a package deal."

The price pressures add to what is already a cutthroat streaming market, with some 30 operators hawking online video services in the country of 1.3 billion people. Viu, a smaller streaming player run by Hong Kong-based PCCW Ltd.'s media arm, recently decided to exit the market because it lacks the cash to challenge bigger rivals, India's Economic Times reported Dec. 16, citing an executive it didn't name at Viu. Mubi, a U.K.-based curated streaming service, became the latest to take a crack at the market.

While the effect of higher mobile phone tariffs will ripple across the industry, services that draw higher-income Indians who can easily afford to pay a little more for wireless access are somewhat insulated, said Mihir Shah, India vice president at Media Partners Asia in Mumbai. Free services - like Bytedance's TikTok and social media video sites will take a more direct hit as it becomes more expensive to watch on wireless devices, he said.

In aggregate, streaming services will continue to grow, even as costs rise, he said.

While the big streaming brands are competing on price, they're also spending money on content to offer India's viewers more.

Netflix Chief Executive Officer Reed Hastings has said the company wants to become "more Indian" in its content offering and plans to spend as much as $420 million (roughly Rs. 2,991.8 crores) to create local TV and films. Disney's Hotstar has drawn hundreds of millions of active users to exclusive sports programming, especially cricket, the nation's most popular game. For its part, Apple is adding to its TV+ offering a series based on the bestselling novel Shantaram about a convicted Australian bank robber and heroin addict who escapes from prison and lands in the slums of Mumbai.

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