Netflix is a successful OTT in US as: (1) cable TV ARPU is USD60 per month versus Netflix’s ARPU of USD20-24; (2) higher broadband penetration (~80%) with good speed; and (3) original content is dished out by Netflix. In India, Netflix currently lacks these advantages. Hence, we do not expect Netflix to have any major impact on Indian DTH/cable TV players over medium term. Netflix has a long way to go before tasting success in India.
In India, Netflix’s subscription rates are INR500, INR650 and INR800 for basic, standard and premium packs, respectively, which are 2-3x the prevailing cable TV/DTH rates. Besides, broadband will entail additional costs. Internationally, Netflix has done well riding attractive pricing which is almost half the cable TV/DTH rates, and original content. The company currently does not enjoy these benefits in India. To attract subscribers, it is offering free services in its first month of operations. Plans are also afoot to facilitate streaming via laptops, TV, smart phones and tablets. However, we believe in India where subscribers pay ~INR250-450 per month for cable TV (includes sports channels), Netflix’s rates are on the higher side. Broadband speed will also be a challenge. Netflix requires minimum speed of 512kbps and recommends 3mbps speed for SD content and 5mbps for HD videos, which further limits its expansion plans.
Netflix is currently beaming international movies and TV shows in India including its original productions such as House of Cards and Orange Is the New Black. The company is currently not offering local content. Sports content, the main driver of the OTT platform, is also not offered. With India being a country with diverse culture it consumes content in 8 different languages. Currently, Netflix is beaming only English content which will attract only niche audience.
Thursday, January 07, 2016
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