Subscription-Based Services Make A Big Push Into India

Having ruled the roost in developed markets — where opportunities are saturated — subscription-based services are making a big push into developing countries such as India that offer vast potential.

This is evident from comments by Apple Inc. AAPL CEO Tim Cook at the company's fiscal year second-quarter conference call — Apple is investing quite a bit in India, with tons of energy going into the country on a number of fronts.

Indian Consumers Circumspect About Subscription-based Model

Most media companies thrive through an advertisement-based business model in India, given that consumers are orthodox, not wanting to spend on subscriptions beyond basic internet connections. Additionally, people do not have the drive to get access to premium content.

Netflix — Pricey, Elitist

On foraying into India in early 2016, Netflix, Inc. NFLX, initially offered its services free for a month. Though initially, there was a lot of interest in it, with the payment-based service kicking in, subscriber numbers gradually began to drop off. Unlike OTT, or over-the-top, service platforms, Netflix keeps its services free of advertisements.

Netflix priced its subscription at Rs. 500 per month (basic plan), while it had two more plans priced at Rs. 650 (standard) and Rs. 800 (premium plan), respectively. The lack of pick-up was blamed on the limited content inventory, higher pricing and the poor broadband infrastructure in India. Additionally, most leading television companies have their own online streaming brands, which offer stiff competition.

A Livemint article quoting Sri Rajan, chairman of Bain & Company India Pvt. Ltd, said, "There will always be an audience for Netflix type of applications or content. But, it'll be limited to the very elite of this country."

However, as Netflix approaches the watershed landmark of 100 million subscribers, there is no denying of the fact that international subscribers will have to play a major role to play in the company's next leg up.

The company has a tall order before it, if it has to increase the subscriber count in India over the 4 million it is currently estimated to have. The company might have to look beyond the English-speaking population, and therefore, has to invest in regional content. Higher subscription cost relative to competition or cable/DTV companies, is also perceived to be a barrier.

To overcome the infrastructure bottleneck, Netflix, according to Economic Times, is working on a system to stream videos at Internet speeds as low as 100kbps without impacting quality. This would help consumers to stream up to a maximum of 30GB video content within a 2GB data cap, thus facilitating viewing of content through mobile phone on poor networks with limited data caps.

Source: NScreen Media

"When you look at Alphabet Inc GOOGGOOGL's YouTube having 1 billion active users and 1 billion hours every day, when you look at Facebook Inc FB's multi-billion numbers, we see that the Internet is just a phenomenal opportunity. You know, of course, we're a pay service, not ad supported. We're not as deep in international as those companies," Reed Hastings, the CEO of Netflix said in the earnings call.

Source: NScreen Media

"But we definitely see a big opportunity around the world to just continue to do what we've been doing, which is make fantastic content, get people really excited about that content, and then we're just continuing to grow."

However, Netflix has serious competitive challenges in India. Among the online streaming service providers, Hotstar, operated by Twenty-First Century Fox Inc FOXA's Indian subsidiary Star, is the leader in terms of subscriber numbers, with its experience with Indian audience, right pricing strategy and rich content and partnership giving it an unique advantage over others.

Source: Economic Times

Amazon Steam Rolls Into Indian Entertainment Market

Meanwhile, online retail behemoth Amazon.com, Inc. AMZN has also steamrolled into India, with its Amazon Video, launched world over, including India, in December 2016. Leveraging its strength in e-commerce, Amazon provides Prime Membership along with free shipping at a cost of Rs. 499 per year, which is highly competitive. The membership allows access to exclusive Bollywood and regional blockbusters, Hollywood movies, U.S. TV shows, Award-winning Amazon Originals and Kids' shows.

The content can be watched on phone, SmartTV, FireTV stick and on up to three devices at once.

More In The Fray

Another digital offering that is doing great is Voot, owned by Viacom 18, a joint venture between Viacom, Inc. VIAB and TV18, a subsidiary of Indian conglomerate Reliance Industries. This operates on an advertising-led video-on-demand model.

Most other digital offerings by companies backed by television channels can afford to offer them free of cost, as their revenues come from advertisements and subscriptions by TV viewers.

WWE Bristles For India Challenge

World Wrestling Entertainment, Inc. WWE holds over 500 professional wrestling events a year, broadcasting them to about 36 million viewers in over 150 countries. WWE has a huge following in India, in terms of TV ratings and fan support. Therefore, it is no surprise that the company sees India as a promising opportunity.

Since a lack of local talents or wrestlers is viewed as a negative, WWE has been having tryouts currently in Dubai evaluating ten talented athletes from India. Lovepreet Sangha and Satender Dagar are two local talents it added recently. WWE has also been vending their official merchandise in India, while its official YouTube channel has videos posted with Hindi commentary, the Hindustan Times said, quoting WWE executive vice president Ed Wells.

The recent victory of Jinder Mahal an Indian-origin wrestler in the WWE Smackdown brand's Backlash pay-per-view event in Chicago was perceived to be a conscious decision on the part of WWE to target fans and customers one of its highest-growth markets.

Despite the roller-coaster ride the firms foraying into India are experiencing, India does provide a huge window of opportunity. Every dollar spent, every step taken and every strategy devised to further their presence in India would only go a long way in reaping rich rewards these firms cannot turn a blind eye to.

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