Bengaluru:Netflix Inc. is currently focused on getting a content fit and broadening its existing programming in India, co-founder Reed Hastings said during a post-earnings conference call on Wednesday.
“We are still working on India. I would say that (India) is a more speculative investment than, say, South Korea or Japan, which again was very speculative five years ago but we have got a great match there,” Hastings said.
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The world’s largest video-streaming service had earlier said that it spent about Rs 3,000 crore on content programming in India across 2019 and 2020 and stated plans to spend significantly more this year. Last month, it released its largest-ever programming slate for the country, with more than 40 original titles expected to debut on the service over the next year. Netflix has commissioned about 90 to 100 productions, including 30 films, in India since its debut here in 2016.
That said, India and Brazil are the only two markets where the production of content is currently shut down, the company said in a letter to its shareholders. “This month, things are terrible in the covid spike. But outside of that, we’ve been really producing a lot of great new content that’s currently shut down.” Hastings said on the call.
In comparison, Netflix plans to invest about $500 million in original movies and television shows in South Korea this year, while it has also stepped up investment or Japan’s anime shows in recent years.
Overall, Netflix plans to spend over $17 billion on content in 2021, a jump from its $11.8- billion budget in 2020 and $13.9 billion in 2019. The dip in content-related expenditure last year was mainly due to production delays caused by the pandemic.
Netflix co-chief executive Ted Sarandos however noted that India is a tremendous opportunity for the company.
“It’s just like all great opportunities. It’s a long journey, and it’s a challenge. And we think it’s worth it. That’s why we’re investing early and trying to stay ahead of it. I think we will be able to see those kinds of results that we’ve seen in other places in the world as we continue to learn more” he said during the call.
Pricing experiments
Netflix is also continuing its various pricing experiments in India as it looks to broaden the user base, while retaining its premium offering. Last month, ET reported that the service was piloting for select users a new Rs 299 entry-level plan, which allows subscribers to watch its shows and films in high definition (HD) on a single mobile phone, tablet or computer screen at a time.
The company’s existing entry-level plan, priced at Rs 499, also provides support for television viewing, while its Rs 199 mobile-only plan supports only standard definition (SD) content. Among other plans, Netflix has piloted over the years include a free weekend access to non-subscribers, weekly plans, and discounted long-term subscription plans.
“We are really trying to find a set of plan types with the right kind of features and match them at the right price points to a wide group of folks,” Greg Peters, chief operating officer and chief product officer at Netflix, said during the earnings call. “An important part of it is making sure that we are continually looking at how to broaden accessibility to bring in price points that are low enough for more of the world’s population to be able to access the service.”
These measures come at a time when the service is facing intense competition from players such as Disney+ Hotstar, Amazon Prime Video, Essel Group’s ZEE5, Sony Pictures Network’s SonyLIV, and Reliance-backed ALTBalaji in India, all of which offer their services at much lower price points. Times Internet-owned MX Player currently operates on a free ad-supported model.
Password sharing test
During the call, Netflix executives also elaborated on its recent test to crack down on password sharing, wherein it was prompting select users to verify they share a household with the account holder.
“We will test many things, but we would never roll something out that feels like turning the screws. It’s got to feel like it makes sense to consumers” Hastings said.
That said, the company is going to continue looking at different ways to ensure that the “people who are using a Netflix account are the ones that are authorized to do so”, Peters said. “We’ve been doing this for a while. You may see it pop up here and there in different ways, but it’s sort of the same framework that we use.”
Pandemic impact
During the quarter, Netflix’s subscriber growth was however weaker than its projections. It added only 4 million subscribers for the first quarter, taking its total base to 208 million paying members.
In its letter to shareholders, the company attributed this slow growth to the “big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays”. Netflix had added a record 15.8 million subscribers in the corresponding quarter last year, as people stayed indoors due to lockdown restrictions to tackle the Covid-19 pandemic.
“We don’t believe competitive intensity materially changed in the quarter or was a material factor in the variance as the over-forecast was across all of our regions,” it said in the shareholder letter.
Revenue however grew 24% year-over-year to $7.16 billion while net profit jumped to $1.71 billion for the quarter, from $709 million in the corresponding quarter last year.
In January, Netflix had said it is very close to being free cash flow positive and that it no longer needs to raise external financing for its day-to-day operations. The company said it will also kickstart a stock buyback programme this quarter, and has authorized up to $5 billion in buybacks.
Netflix further warned that the ongoing quarter is going to be more challenging, estimating an addition of only one million new subscribers to its member base. The company expects paid membership growth to re-accelerate in the second half of 2021, on the back of a strong programming slate including the returning seasons of several of its popular shows like ‘Money Heist’, ‘Sex Education’ and ‘You’ among others.
*Disclosure: Times Internet owns ETtech
