Initially, Netflix has targetted high income group that have smart phones and international credit cards and enjoys Hollywood content. Great content and ad-free viewing experience will be the differentiating factor for the company. It may focus on mass market in future as penetration increases. Further, globally Netflix associates itself only with movies and TV services, live Sports is not its forte (not impacted penetration in other markets). It expects to maintain this strategy in India as well.
Netflix prefers to have exclusive deals with the broadcasters. The company will offer Hollywood content and great content from world over, including India. It will continue to improve its regional library. Also, Netflix is in the process of producing local originals in Mexico, France, Japan, and Brazil. Netflix may start producing content in India as well.
Netflix, launched in India for ~60 days, is still evaluating its pricing strategy. In our view, the company should delve in differential pricing for its Hindi and English content (though it has not done anything like this in other markets). We believe its subscription rates of INR500, INR650 and INR800 for basic, standard and premium packs, respectively, which are 2-3x the prevailing cable TV/DTH rates, are not sustainable unless the cable TV/DTH rates go up.
Rising popularity of OTT segment has pushed the broadcasters to explore beyond the B2B segment. For the first time, they have the option of reaching out to consumers directly. We believe OTT will be an additional avenue for broadcasters to monetise their content.
