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Netflix India Announces Major Content Push with 17 New Titles

Editor, TRANSFIN.
Jul 18, 2020 2:46 PM 5 min read
Editorial

Netflix released its numbers for the June quarter two days ago - and the headlines numbers were quite impressive. 

Besides announcing that longtime Chief Content Officer Ted Sarandos would be elevated as co-CEO, the streaming giant reported adding 10.2m paid new subscribers in Q2 2020, beating the company’s own estimates. This brings the total number of paid subscribers added so far this year to 26m: this number for all of 2019 was 28m. Meanwhile, revenue grew 25% YoY.

 

However, a weaker-than-expected outlook for the third quarter coupled with an earnings miss (despite a revenue beat) painted a bit of a negative picture pressuring the stock. 

 

Netflix and Rule the World

It’s obvious why Netflix - and the streaming industry as a whole - is having such a good year. The paradigm shift brought about by the coronavirus pandemic (i.e. Millions of people working, studying and staying at home) has fundamentally changed the way we consume entertainment or pass the time.

Theatres, concerts, gyms, playgrounds, sports complexes, restaurants and pubs are no longer safe (or available) options. Recreation is now limited to being glued to your screens watching whatever your OTT service has in store for you.

Binge watching is the new norm. “Netflix and chill” is the new flavour of the zeitgeist.

 

But Will the OTT Honeymoon Last?

If we focus only on Netflix - which is arguably the most powerful player in the OTT industry - we’ll find that future prospects will be determined by (1) how long the subscriber growth can sustain and (2) how much longer Netflix can keep up its meteoric pace of releasing new titles. 

Subscriber Growth

Even Netflix seems to be in two minds about this. Chief Financial Officer Spencer Neumann opines that the new subscribers Netflix added over these pandemic-laden months are likely to stay and not cancel their subscriptions since they are “highly engaged...So Netflix 2021 is going to be a much better service than Netflix 2020.” At the same time, Netflix’s Q2 report played down expectations for the second half of the year, when it expects less growth and only 2.5m subscriber additions in the third quarter. This metric is an important one for a hypercompetitive industry where customers can jump ship anytime they want to. Analysts estimate the rate of churn for Netflix is 10-20%; it may be as much as 50% for other platforms.

Releasing New Titles

This is Netflix’s niche - being able to produce and distribute more movies and TV shows than its competitors for viewers to binge on. Its vast and diverse content catalogue is what sets Netflix apart from its competitors, but it also makes the pandemic a double-edged sword for the company’s growth prospects.

How? Let’s dig a little deeper into this...

 

Content is King

Content is the backbone of Netflix (and, indeed, all OTT platforms). In 2018, for example, the company announced 80 features - that’s more than one per week! In contrast, Disney, Fox, Universal, Warner Bros and Sony had merely 56 features between them.

Currently, the company is working on 200 different projects globally, all slated for release in the coming months.

At the same time, as other studios launched their own streaming services and pulled their titles from Netflix (like Friends and The Office), the latter has aggressively pushed for more “original content” on its platform to be more independent. In fact, about 85% of all new spending on content reportedly goes towards original spending.

The platform is set to introduce 59 new originals in July alone - that’s nearly two new titles a day! This includes new seasons of TV shows, entirely new TV shows, new movies, new documentaries and even new anime.

But here’s the catch: To retain subscriber interest, Netflix has to keep delivering new content. But this is hard to do when so many countries are still shut down or have imposed restrictions to contain the spread of COVID-19 (this is also why the company became cash flow positive in the recent quarter). And this is what makes the pandemic a double-edged sword for the company.

In India, for example, all production has been halted since mid-March.

Speaking of India…

 

India Rising

Netflix’s India business is an important one for the company due to rising competition back home in the US and India’s vast consumer market. India accounts for 5m paid subscribers, and founder Reed Hastings had announced a ₹3,000cr ($400m) investment over a period of two years to expand the company’s presence in the country through original content creation.

PS: Despite its importance in terms of expansion prospects and audience numbers, Asia Pacific is still the least-lucrative market for Netflix, with quarterly revenue of only $569m, much lower than Latin America and Europe, Middle-East and Africa (EMEA). In terms of Average Revenue Per User (ARPU), though, Asia Pacific’s number ($8.96) is slightly higher than Latin America’s ($7.44).

 

More the Content, Merrier the User

Netflix India has announced an aggressive content push. It has announced 17 new titles for the “coming months”, including six new movies and two new TV series. (Here’s the entire list.)

However, production is yet to restart full-steam. The company has many already-shot features in its kitty and is in the process of post-production for these titles; Sarandos, in fact, has said that the release calendar will “certainly” not be moved in 2020. 

But many productions were paused abruptly due to lockdowns and infection fears. Moreover, the way the pandemic is spreading right now - quicker and more dangerously in some countries - means the company cannot pursue a one-size-fits-all approach, as its letter to investors admitted. 

This is particularly true for India, which is now the third-worst affected country by number of confirmed positive cases. With the number of new infections reaching new highs each day and the worst-affected state being Maharashtra, whose capital Mumbai houses the entertainment industry, Netflix has said:

Prospects in India are more challenging and we are hoping to restart [production] later in the year.

If and when production reaches pre-pandemic levels, Netflix will no doubt face a reckoning. In the meantime, it will also have to confront increased competition in the US vis-a-vis Disney+, AppleTV+, HBO Max, Peacock and Hulu. The same goes for the Indian market, where competitors include Amazon Prime Video, Hotstar and numerous domestic players.

Streaming may very well be the future of entertainment, but how soon the industry will become a tour de force depends on how many customers it can retain once the era of social distancing wanes (which, hopefully, it will!).

FIN.

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