Netflix has lowered subscription prices in 116 countries, inspired by the success of its business model in India.
Customer engagement and revenue growth
After introducing a more affordable plan in India, Netflix has experienced a significant increase in customer engagement by 30% and year-on-year revenue growth of 24%.
This success was achieved through a strategic reduction in subscription prices ranging from 20% to 60%, specifically tailored to appeal to the Indian market.
India a “big prize”
During an earnings call, Ted Sarandos, co-CEO of Netflix, emphasized the significance of India as a key market with its vast population of entertainment enthusiasts.
He stated, “India is a big prize because it’s an enormous population of entertainment-loving people and we have to have the product they love.
So we are focusing on creative content while also optimizing pricing, and we see immense potential for continued growth in India.”
The Indian market is unique in that it has a preference for local content, which is gaining popularity not only within India but also internationally.
Ted Sarandos highlighted the success of local Indian content, citing examples such as RRR and Gangubai Kathiawadi, and expressed confidence in Netflix’s prospects in India.
He stated, “We can do quite well in India. We are still investing in it, and I believe we will ultimately achieve great success in India.”
Price reduction
Netflix, in its earnings report for the March 2023 quarter, stated that it has drawn inspiration from the success of lower pricing in India and has consequently lowered prices in 116 more countries.
The company noted, “Learning from this success, we reduced prices in an additional 116 countries in Q1.”
The combination of lowered prices and an enhanced content lineup has resulted in a significant year-on-year growth in customer engagement in India, reaching nearly 30%.
Moreover, the forex-neutral revenue growth in 2022 has accelerated to 24%, compared to 19% in 2021.
The countries where Netflix implemented price reductions accounted for less than 5% of its total revenue during the financial year 2022.
Prioritise adoption over revenue
Netflix expressed its belief that increasing adoption in these markets will contribute to long-term revenue maximization.
However, the company’s global net income declined by approximately 18%, from $1,597 million in the same period a year ago to $1,305 million in the quarter ending March 2023.
During the reported quarter, revenue increased by 3.7%, reaching $8,162 million compared to $7,868 million in the March 2022 quarter.
Paid membership also experienced a YoY growth of 4.9%, totaling 232.5 million globally.
Forecasts
Netflix anticipates a decline in net income of approximately 1.6% to $1,283 million in the April-June 2023 quarter.
Netflix projects a revenue increase of 3.4%, reaching $8,242 million.
Ad-based plans
Although Netflix was previously opposed to ads on its platform, it has now introduced advertisement-based plans with lower subscription price points compared to its initial plans.
Netflix has reported that the engagement on their ads tier has surpassed their initial expectations, and they have observed minimal switching from their standard and premium plans, as anticipated.
Netflix has a lineup of upcoming Indian content on its platform, including period drama “Heeramandi,” Zoya Akhtar’s “The Archies,” returning seasons of “Delhi Crime,” “Mismatched,” “The Fabulous Lives of Bollywood Wives,” “Kota Factory,” and originals featuring Kareena Kapoor Khan and Anushka Sharma, among others.
