Two and a half years after its launch in India, Netflix Inc. had its first major success. Based on a sprawling novel by Indian-American author Vikram Chandra, 2018’s Sacred Games was a Hindi-language TV show exploring Mumbai’s criminal underworld and a policeman’s efforts to save the city. The drama stood out in a country best known for romantic musicals, which was the point. The New York Times named Sacred Games one of the best foreign-made shows of the past decade, and Netflix described it at the time as its most-watched locally produced show in the country.
The success seemed to indicate that the company’s plan for India was coming to fruition. Netflix’s formula for international expansion, which has worked everywhere from Canada to Japan, begins by targeting young, wealthy consumers in big cities who will pay to watch Stranger Things or Narcos. Then, to reach an ever wider audience, the company hires a local team to commission projects from the country’s top producers, giving them creative freedom they wouldn’t have elsewhere.
Some things about India worked in favor of Netflix. The country has a robust local film industry, a growing middle class and expanding internet access. Several months before the release of Sacred Games, CEO Reed Hastings told a group of Indian business leaders that Netflix would sign 100 million customers in the country.
Almost four years later, she has only 5.5 million subscribers in India, according to research firm Media Partners Asia. Netflix describes the second season of Sacred Games as a success, but has not announced a third season. Many of his other shows were canceled after just one season. On a call with investors in January, Hastings expressed frustration with India’s lack of progress, alarming employees who aren’t used to their boss being so open about Netflix’s failures.
The stakes are higher than ever. Slowing subscriber growth has investors worried, and the company’s share price has fallen nearly 40% so far this year, wiping out more than $100 billion in value. To continue to grow, Netflix will need to find customers in Asia, the Middle East and Africa. There is no greater prize than India, the second most populous country in the world. The only country with more inhabitants, China, has blocked all major streaming services.
Netflix’s struggles are even more notable when compared to rivals Walt Disney Co. and Amazon.com Inc., whose Indian services attract millions more viewers. “Netflix has underestimated the immense complexity and challenges that India brings,” says Vivek Couto, Head of Media Partners Asia.
Netflix’s troubles began when executives began debating how much to charge when it launched in the country in January 2016. At the time, typical Netflix prices around the world were $8-$10 per month, aimed at young consumers who may be looking for a cheaper and more practical product. alternative to pay TV. Pay TV in India costs much less than most countries in the world, usually between $2 and $3 per month. But Netflix decided it would rather have fewer, more lucrative subscribers first, so it charged 499 rupees per month, or about $7.50 at the time.
The company then reconsidered, deciding that it could only achieve the number of subscribers it hoped for by lowering the price. Executives devised a plan that would allow customers to watch its entire library for less than half its standard price, but only on mobile devices. In December, Netflix slashed its price even more drastically, bringing it closer to the competition.
Lower prices have attracted more customers, but retaining them has been a challenge. Mobile-only Netflix subscribers were much more likely to cancel after just a few months than those who paid for the upfront, more expensive plans. India also has laws that force many customers to approve payment every month, which increases the number of people who don’t renew. “India has been a real iterative learning exercise in how to make payments right,” says COO Greg Peters.
Programming for India’s diversity – the country is home to dozens of different ethnic groups who speak more than 20 languages - is also challenging. Netflix has signed deals with some of the biggest production companies in the country, including Red Chilies Entertainment and Dharma Productions. But, according to Couto, most people still sign up for its international programming. “Customers in India are not activating Netflix to watch Indian content,” he says. Netflix executives say its struggles are partly the result of working with Indian producers more used to making movies than high-end episodic television. He has made several successful films, although his head of original films left the company last year.
Local producers, meanwhile, blame Netflix for hiring executives without strong ties to the country’s film community, then not knowing exactly what it wants and insisting on micromanaging projects, according to reports. conversations with people familiar with Netflix’s Indian operations. “Netflix is not an American company that people want to hate,” said one producer, who asked not to be named for fear of alienating a potential business partner. “Netflix people in India have severed relations.”
These issues were most apparent with the ill-fated TV show Baahubali: Before Beginning, a prequel to one of the most successful film franchises in Indian history. Netflix spent over $10 million to develop and produce the first season, making it an expensive project by local standards. But the executives who commissioned it have since left the company, and when Netflix hired Monika Shergill to oversee Indian content in 2019, she didn’t like what she saw. As production dragged on, the lead actor left the show and Netflix brought in another creative team to come up with a new vision. Despite reports that the show has been canceled, Netflix says it is still working on the project.
There is still time to recover. It took years for Netflix to find a foothold in major markets such as Brazil and Japan. And while the Disney+ Hotstar service has 45 million subscribers and Amazon’s Prime Video around 15 million, Netflix says the comparisons aren’t straightforward. Hotstar broadcasts cricket, the country’s most popular sport. Both services are also cheaper, with Amazon bundled with its home delivery service, with Prime and Hotstar customers paying just $1 a month. The average Netflix customer pays more than $4, according to Media Partners Asia.
There are also signs of change. A wave of customers joined after Netflix cut costs in December, and Couto expects the company to end 2022 with nearly 8 million subscribers. After scratching numerous series, he also had a few hits, most recently including The Fame Game, a show starring Indian actress Madhuri Dixit. “India has a rich, storied history of storytelling with amazing actors and writers,” says Bela Bajaria, Global Head of Television at Netflix. “We are making significant investments in local and authentic stories in India.”
Covid was a time when streaming services were once again taking hold, as people were looking for entertainment they could enjoy without leaving home. But it also held back Netflix in India by delaying productions as it craved new locally relevant content that would attract viewers. With the easing of restrictions, that is changing. The shows that Netflix had planned to make in 2021 are now set to be made in 2022. Every production is a chance to find the next hit.