With Eye On the Future, Netflix Could Enter India In 2016

July 1st, 2015 by Trefis Team
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Streaming giant Netflix (NASDAQ:NFLX) is reportedly set to enter the Indian market in 2016, according to Indian newspaper The Times of India. [1] This launch will be part of the company’s aggressive international expansion strategy through which it intends to launch streaming services in 200 countries over the next two years. The Indian streaming market is in its infancy, but has the potential to grow in manifold ways. We believe that Netflix is entering the country with an eye to the future. Netflix is currently available in more than 50 countries and has over 62 million subscribers globally. [2] Securing new users in international markets is the key agent of growth for the company.

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Netflix Focusing On India’s Potential

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Netflix has stated earlier that the company intends to continue expanding internationally and that India might not seem like a logical choice at first look. India had 243 million Internet users in 2014, behind only China and the U.S. [3] But less than 8% of these connections have connection speeds of 4 Mbps or above, the minimum speed recommended for streaming high definition content. [4] For a country of over 1.2 billion, India’s over-the-top (OTT) services market is pretty nonexistent, having a combined total of 12 million subscribers in 2014. [5] Additionally, overall efficiency and reliability of India’s Internet services is inferior to those of developed nations such as the U.S.

However, Netflix seems to be focusing on what will be rather than what is. According to a recent Media Partner Asia (MPA) report, India’s OTT market is set to explode and will touch 105 million by 2020. [5] As per a recent Internet Trends report by VC firm Kleiner Perkins, India added 63 million new Internet users last year and has one of the fastest growing user bases in the world. Both Facebook and LinkedIn report that India is their second largest market and the country is also home to a burgeoning $6 billion online retail industry. [6] India is also making a push to improve its Internet speeds and the country’s average connection speed improved by 28% last year. [4] As the Indian streaming market is still in its infancy, Netflix won’t have to compete with any major players. Netflix will try to establish itself while the Indian OTT market is still in its growth stage in order to fully reap the benefits before the market starts to saturate.

Netflix Faces A Serious Threat From Piracy

A major obstacle in Netflix’s path to a successful foray into India is piracy. Piracy-tracking firm Excipio reported that Netflix’s hit series Daredevil was downloaded illegally 2.1 million times within the first week of its release. [7] With close to 150,000 downloads, India was only behind Brazil in the list of countries where the show was pirated the most. Netflix also experienced something similar when House of Cards’ season three was downloaded illegally around 682,000 times within the first 24 hours of being available on torrent services. [8] India was again among the top three countries where the show was pirated the most. Piracy has a direct effect on the attractiveness of Netflix’s exclusive programming. Subscribers may not be interested in viewing these shows at Netflix’s paid platform when they can get the same shows for free.

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Notes:
  1. Netflix to enter India, DTH companies edgy, Jun 25, 2015, The Times of India [↩]
  2. Netflix’s SEC Filings [↩]
  3. Internet Users by Country (2014), Internet Live Stats [↩]
  4. Akamai’s State of the Internet Q4 2014, Akamai [↩] [↩]
  5. Making OTT content available on TV screens a possible way forward in India, April 20, 2015, exchange4media.com [↩] [↩]
  6. Netflix Is Launching In This Massive New Market, June 25, 2015, Time [↩]
  7. Netflix ‘Marvel’s Daredevil’ Plundered by Pirates, April 16, 2015, Variety [↩]
  8. ‘House of Cards’ Season 3 Pirated, With China Top Country for Downloaders, March 1, 2015, Variety [↩]