Netflix India original series Sacred games have made its debut this year. It is based on the novel of the same name by Vikram Chandra. House of Cards, Netflix’s 2013 U.S. debut series, is a dominant player in the Indian market.  Three more Indian original series has been planned by Netflix for this year.

Netflix has currently 600 thousand subscribers in India. It is targeting the internet boom in India by planning to reach 100 Million subscribers base in India. For this purpose, it has planned a slew of original content like lust stories, Ghoul, Leila, Crocodile, Sacred games.

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However, Netflix India’s strategy is flawed. It is fraught with lots of assumptions based on their US strategy. Their strategy is to reach 100 million subscribers with original content that cater to large section Indian middle class. To achieve this goal. They have first targeted the urban English speaking middle-class section of society.

This has resulted in a present subscriber of 600 thousand in India. However, the contents of their original series are dark in nature, cater to the niche audience. The content is full of Sex, Expletives, violence, and are offensive to a large section of the Indian public.

Netflix India gamble

Netflix gamble of targeting of Western Indian urban society with their original content will help Netflix gain a few thousand subscribers. But this gamble, in the process, will alienate at least half a million of potential subscribers for good.

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Their strategy also includes retaining the active subscribers and adding new ones at a very fast rate. However, Netflix is having a myopic view. It is making an age-old mistake of segmenting India into rural & urban.

India is an interesting market and a complex market. Foreign companies find it complex, fragmented from within. But Indian market appears to be united when looked from an outside prism. Several Foreign companies like Netflix don’t have a deep understanding of how Indians approach entertainment.

The business template that has worked for Netflix in the US and Europe probably would not work in India. Netflix business model is to gather subscribers at a very fast rate by using quality content, that’s not available on any other platform. This strategy works well in evolved markets like the USA and Europe.

CEO of Netflix Reed Hastings in earnings call said, “Netflix is having great success getting established, getting a reputation going. And with this triplet of Lust Stories, Sacred Games, and Ghoul, we are really getting some nice momentum in our India growth.”

However, the California-based company is playing with fire if it starts celebrating the success of LustStories & sacred games in India. These content can retain the existing initial subscribers, who took the subscription to watch popular Netflix’s show round the world. They won’t attract new subscribers.

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Explicit content of similar nature of Indian Box Office in the past has never earned well enough.  Wouldn’t it be foolish to mark this as a real success! No. of subscribers who appreciate this quality of content is very low. NetflixIndia will hit a plateau.

In the earnings call, Reed Hastings, CEO of the California-based company added that it is still “a niche product” and has “a long way to go to expand languages and many other aspects” to be able to become a broad Indian product. The transition from “niche” to a broader market won’t be easy.

A large section of potential future subscribers is getting alienated by the initial content which is over-sexualized and adult in nature. Indians don’t appreciate bringing into their homes, services that give family members access to explicit and violent content.

In the same earnings call, CPO Gregory Peters said the company is “far from reaching a limit in terms of the addressable market given the pricing structures” it has currently deployed. This means, even after a couple of years, Netflix is figuring out which way to go.

The mix of hybrid push-pull strategy is incorrect. NetflixIndia’s business strategy in India was flawed right from the start.

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Netflix is a publicly traded company. The company & its management has to be accountable when it speaks about a market that has a potential to add 300$ to its stock price. Netflix deal of Building a content empire based on a flawed strategy on thin air won’t help achieve its long-term goal.

We, at thebravehindu.com, believe that the management is making a mistake in the Indian market. If they don’t ask the right questions, they will never be able to figure out the right answers. 100 Million subscribers in India, will add 300$ value to the stock. These will remain an eternal dream. Dreams that had potential to turn true.

Why is India so important?

China has banned Netflix to have a direct entry to the Chinese market. Stocks of the company is deeply stressed on the Wall Street. India, with its huge population and increasing middle-class, can be its savior. Netflix needs those 100 Million subscribers from India. The following tweet by Jesse Colombo shows how Netflix is yet to earn a profit in its history and is under stress on the Wallstreet to deliver growth and profitability.

Netflix aims 100 million subscribers from India. Currently, Netflix has a subscriber base worldwide of 125 million. India’s importance with respect to Netflix stock price on the Wall Street is huge. Yesterday, the stocks were trading at 400$ with an additional 100 million subscribers from India will add approximately 350$ to its present stock value.

What has Netflix got wrong in India?

From outside, the Indian market looks like a single-market but in reality, it is complex and fragmented. This is the trap Netflix’s CFO David Wells falls into.  He wants to address one segment before he moves to others. He doesn’t have the real picture of the complex overlapping of segments in the Indian society.

If a company cracks the Indian market, it will be able to do successful business here for decades. If companies get it wrong, the departure of the companies from the Indian market will be swift and abrupt.

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It’s a no-brainer, that after conquering the American market. Netflix would love to rule OTT space in India. If the business model is reset, NetflixIndia has a fair chance to maximize subscribers in India.

Overt sex scenes in SacredGames on NetflixIndia is creating a perception in the minds of Indian viewers that it’s a platform hosting high-end porn. This is the last thing Netflix wants as brand positioning in the crucial market of India. Netflix also needs to worry about its sexual content which may result in attracting India’s censorship laws. As of now, no censorship exists for OTT platforms. But this may change soon.

A general perspective that’s sadly developing about NetflixIndia is that it’s fast turning out to be a breeding ground for all filmmakers and actors who have become irrelevant in Indian Cinema. That perception doesn’t bode well for its intent to get 100mn subscribers from India.  

If Netflix intends to get substantial subscribers from India, they could have made a better call to who will helm their flagship series?

Box Office numbers are also a reflection of connecting a filmmaker has with his audience. Netflix is playing with fire in India.

Netflix must be careful with its strategy in India. It is a highly sensitive market where a high priced OTT like  NetflixIndia should always be cautious about its brand positioning and image. This sensitivity will help it gain the trust of subscribers. In addition, it will also help in retaining them for the long-term. Callous attitude will make them lose subscribers and eventually loss in stock value.

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Netflix must understand that machines won’t be able to capture the real data in a chaotic market like India. It’s probably the only country in the world, where languages and cultures change every few miles. Still, there’s a method in the madness, in the way this country operates.

They took the easy route of attracting the most Western-oriented audience in India, alienating the 250 million odd urban middle-class, the class that could have brought the 100 million subscribers to Netflix from India. This 250 million odd middle class in India is neither “niche” according to the definition of Reed Hastings, nor they are true “mass”. This class is very sensitive about what it pays and what it opens up to their families. Netflix will probably regret alienating this large segment.

We believe Netflix will exhaust itself at around 3.5 million subscribers in the long run, if it continues their existing approach for India. This segment is getting alienated at a rapid rate.

Every analyst must question Netflix strategy

Every analyst who is following Netflix stock should question Reed Hastings and others, why they are misleading them with respect to India. Is the management of NetflixIndia really clued in with Indian market & its complexities? And if not, what’s the basis of their exuberant and bullish nature of Netflix’s growth in India.

The real concern is when the California-based Company won’t have answers to justify the business model with respect to India. The California-based company will deemphasize Reed Hastings claim of getting his next 100 million subscribers from India. Any abrupt reversal of policy and approach will impact stock valuation in the future.

Existing shareholders of Netflix and future investors must seek an answer from Netflix management. With the US market reaching a plateau, rest of the world not meeting the expectations wrt addition of new subscribers. India becomes extremely important!

Netflix needs to partner with BSNL and Jio to reach their huge subscriber base. Challenge is that Jio is coming out with its own OTT platform, plus has stakes in other OTTs like AltBalaji and ErosNow. RelianceJio is launching JioGigaFiber and is targeting 500 GB/month consumption per subscriber. Netflix will be eyeing to have an association, but that won’t come easy? Netflix may risk losing its global identity by having an association with Jio.

Stocks of Netflix is overvalued as of today. Analysts say that the actual value should be around 175$ and its trading at around 350$ as of today. Reed Hastings’s press announcement in Feb 2018 that India will give them the next 100mn subscribers set the stock soaring by 50%.

Netflix has to keep its stock intrinsically healthy and at the same time stable in the mid and long term, it will have to sell the story for a very long time to come that they are well on the course to own India? India story must be the mainstay for the company hereon.

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