Reed Hastings
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Netflix earmarks $420M to fight Disney in India
Netflix continues to bet heavily on India, one of the world’s largest entertainment markets, where it competes with more than three dozen rivals, including Disney.
Reed Hastings, the chief executive of Netflix, said on Friday that the company is on track to spend 30 billion Indian rupees, or $420.5 million, on producing and licensing content in India this year and next.
“This year and next year, we plan to spend about Rs 3,000 crores developing and licensing content and you will start to see a lot of stuff hit the screens,” he said at a conference in New Delhi.
The rare revelation today has quickly become the talk of the town. “This is significantly higher than what we have invested in content over the past years,” an executive at one of the top five rival services told TechCrunch. Another industry source said that no streaming service in India is spending anything close to that figure on just content.
While it remains unclear exactly how much capital other streaming services are pouring into content, a recent KPMG report estimated that Hotstar was spending about $17 million on producing seven original shows this year, while Eros Now had pumped about $50 million into its India business to create 100 new original shows. (The report does not talk about licensing content expenses.)
Netflix, which entered India as part of its global expansion to more than 200 nations and territories in early 2016, has so far produced more than two dozen original shows and movies in the country and inked partnerships with a number of local studios, including actor Shah Rukh Khan’s Red Chillies Entertainment.
Hastings said several of the shows the company has produced in India, including A-listed cast thriller “Sacred Games” and animated show “Mightly Little Bheem,” have “traveled around the world.” More than 27 million households outside of India, said Hastings, have started to watch “Mighty Little Bheem,” a show aimed at children.
Netflix, which is expected to spend about $15 billion on content globally next year, has never shared the number of subscribers it has in India. (It has over 158 million subscribers globally.) But the company’s financials in the country, where it employs about 100 people, have improved in recent quarters. In the financial year that ended in March, the company posted revenue of $65 million and profit of about $720,000 for its India business.
The big, big, big Indian market
India has emerged as one of the last great growth markets for global technology and entertainment firms. About half of the nation’s 1.3 billion population is now online and the country’s on-demand video market is expected to grow to $5 billion in the next four years, according to Boston Consulting Group.
But the propensity — or the capacity — of most of these internet users to pay for a subscription service remains significantly low. Most services operating in India today generate the majority of their revenue from ads. And others, which rely on a recurring model, are making major changes to their offerings in the nation.
To broaden its reach in the nation, Netflix earlier this year introduced a new monthly price tier — $2.8 — that allows users in India to watch the streaming service in standard quality on a mobile device. (The company has since expanded this offering to Malaysia.)
Netflix competes with more than three dozen on-demand video streaming services in India. Chief among its competitors in the nation is Disney’s Hotstar. Hotstar’s content includes live TV channels, streaming of sports events and thousands of movies and shows, many syndicated from global networks and studios such as HBO and Showtime.
The ad-supported service offers more than 80% of its catalog at no charge to users and charges 999 Indian rupees ($14) a year for its premium tier.
Among the licensed content that Hotstar — or its operator Star India — owns in the country includes rights to stream a number of cricket tournaments. Cricket is incredibly popular in India and has helped Hotstar set global streaming records.
In May this year, Hotstar reported that more than 25 million people simultaneously watched a cricket match on the platform — a global record. The service, at the time, had more than 300 million monthly active users.
Commenting on the competition, Hastings said the next five to 10 years is going to be “the golden age of television” as “unbelievable and unrivaled levels of investment” go into producing content. “They are all investing here in India. We are seeing more content made than ever before. It’s a great export,” he added.
Disney+, the recently launched streaming service from the global content conglomerate, is set to be available in India and Southeast Asian markets next year through Hotstar, TechCrunch reported last month.
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What lower Netflix pricing tells us about competing in India
At a conference in New Delhi early last year, Netflix CEO Reed Hastings was confronted with a question that his company has been asked many times over the years. Would he consider lowering the subscription cost in India?
It’s a tactic that most Silicon Valley companies have adapted to in the country over the years. Uber rides aren’t as costly in India as they are elsewhere. Spotify and Apple Music cost less than $2 per month to users in the country. YouTube Premium as well as subscriptions to U.S. news outlets such as WSJ and New York Times are also priced significantly lower compared to the prices they charge in their home turf.
Hastings had also come prepared: He acknowledged that the entertainment viewing industry in India is very different from other parts of the world. To be sure, much of the pay-TV in India is supported by ads and the access fee remains too low ($5). But that was not going to change how Netflix likes to roll, he said.
“We want to be sensitive to great stories and to fund those great stories by investing in local content,” he said. “So yes, our strategy is to build up the local content — and of course we have got the global content — and try to uplevel the industry,” he said, identifying movie-goers who spend about Rs 500 ($7.25) or more on tickets each month as Netflix’s potential customers.
Indian commuters walking below a poster of “Sacred Games”, an original show produced by Netflix (Image: INDRANIL MUKHERJEE/AFP/Getty Images)
Less than a year and a half later, Netflix has had a change of heart. The company today rolled out a lower-priced subscription plan in India, a first for the company. The monthly plan, which restricts usage of the service to mobile devices only, is priced at Rs 199 ($2.8) — a third of the least expensive plan in the U.S.
At a press conference in New Delhi today, Netflix executives said that the lower-priced subscription tier is aimed at expanding the reach of its service in the country. “We want to really broaden the audience for Netflix, want to make it more accessible, and we knew just how mobile-centric India has been,” said Ajay Arora, Director of Product Innovation at Netflix.
The move comes at a time when Netflix has raised its subscription prices in the U.S. by up to 18% and in the UK by up to 20%.
Netflix’s strategy shift in India illustrates a bigger challenge that Silicon Valley companies have been facing in the country for years. If you want to succeed in the country, either make most of your revenue from ads, or heavily subsidize your costs.
But whether finding users in India is a success is also debatable.
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Video game revenue tops $43 billion in 2018, an 18% jump from 2017
Video game revenue in 2018 reached a new peak of $43.8 billion, up 18 percent from the previous years, surpassing the projected total global box office for the film industry, according to new data released by the Entertainment Software Association and The NPD Group.
Preliminary indicators for global box office revenues published at the end of last year indicated that revenue from ticket sales at box offices around the world would hit $41.7 billion, according to comScore data reported by Deadline Hollywood.
The $43.8 billion tally also surpasses numbers for streaming services, which are estimated to rake in somewhere around $28.8 billion for the year, according to a report in Multichannel News.
Video games and related content have become the new source of entertainment for a generation — and it’s something that has new media moguls like Netflix chief executive Reed Hastings concerned. In the company’s most recent shareholder letter, Netflix said that Fortnite was more of a threat to its business than TimeWarner’s HBO.
“We compete with (and lose to) Fortnite more than HBO,” the company’s shareholder letter stated. “When YouTube went down globally for a few minutes in October, our viewing and signups spiked for that time…There are thousands of competitors in this highly fragmented market vying to entertain consumers and low barriers to entry for those with great experiences.”
“The impressive economic growth of the industry announced today parallels the growth of the industry in mainstream American culture,” said acting ESA president and CEO Stanley Pierre-Louis, in a statement. “Across the nation, we count people of all backgrounds and stages of life among our most passionate video game players and fans. Interactive entertainment stands today as the most influential form of entertainment in America.”
Gains came from across the spectrum of the gaming industry. Console and personal computing, mobile gaming, all saw significant growth, according to Mat Piscatella, a video games industry analyst for The NPD Group.
According to the report, hardware and peripherals and software revenue increased from physical and digital sales, in-game purchases and subscriptions.
| U.S. Video Game Industry Revenue | 2018 | 2017 | Growth Percentage |
| Hardware, including peripherals | $7.5 billion | $6.5 billion | 15% |
| Software, including in-game purchases and subscriptions |
$35.8 billion |
$30.4 billion |
18% |
| Total: | $43.3 billion | $36.9 billion | 18% |
Source: The NPD Group, Sensor Tower
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