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What Challenges Has Netflix Faced During the Launch in India? What Strategies Does Netflix Implement in Developing Markets?
Entertainment company Netflix engaged in the supply of serials and films of its production since 2013 over the past few years has gained incredible popularity in the United States. Though it decided not to dwell on success in the home country and like any other giant of entertainment industry began to spread around the world. Thus, in 2016, the company announced the promotion to markets of 130 countries around the world and started fast integration even in such developing countries as India. However, during the launch in this state, Netflix faced a lot of challenges related to the economic, cultural, and legislative aspects that significantly complicated this process.
The most obvious of the difficulties encountered is the language barrier. As in other countries, where Netflix decided to expand, in India, only a small segment of the population speaks English. For a company whose movies and series are almost entirely in English, this is not a very good sign, because viewers just would not understand the content provided to them and with a high probability would reject the proposition. Of course, there is an option to connect subtitles, but until the company develops the program in the national language, the clients will not get a full experience from viewing. Another fundamental problem is the implementation and processing of payments due to underdeveloped infrastructure. The complications with payments were observed in Netflix, even in the United States, where people had issues with the cancellation of subscription due to the credit cards system, not to mention India, which is on another continent. Besides, for the population of this country, the logistical aspect of the company’s network may seem much more complicated than for the accustomed US citizens. Therefore, in order to efficiently launch the release of its products in the Indian market, Netflix will have to work hard to adapt to local payment traditions and take into account the customers’ inability to pay by credit cards or via the Internet. It turns out that the previous cooperation of the company with local partners, as well as the solution of problems with payment through phone billing or prepaid cards, are no longer sufficient (McAlone). These two central issues already significantly complicate the integration of Netflix into the entertainment market of India.
The next challenge also belongs to the economic sphere. The thing is the pricing that Netflix decided to establish for its products and services in this developing country. Here, the company made one of the biggest miscalculations, setting the tariff for India to the equivalent for the US one, not considering that viewers here simply can’t afford to pay so much for movies and serials. Although under the terms of the agreement the company provides the first month of free use, which seems to be a seductive proposal that should attract a lot of subscribers, at the end of this period, few will want to renew the subscription at such price conditions (Nayak). Therefore, to make the services available to the masses, as the company seeks, it must conduct a reasonable pricing policy taking into account the economic characteristics of the region.
Another problem affects the sphere of culture and raises the issue of censorship. As soon as the launch of Netflix was announced on the entertainment market in India, the public often began to express concern about the prevalence and access to American programs and TV shows broadcast on Indian television channels. Of course, the company hastened to assure that when connecting to services through any available device, users will have the opportunity to install a personal PIN-code, for example, to restrict access to children. Also, viewers have the chance to fill out a questionnaire so that programs are marked with the appropriate age rating. But despite these assurances, people have some misgivings. The next complication concerns technological development in a developing country. As known, to get an excess to Netflix and to have an opportunity to take advantage of all the benefits provided by its services, one need a stable Internet connection. In the case of India, access to the worldwide network is problematic enough. In addition to the difficulties with access, it is worth noting that internet speeds in India are already quite low, which calls into question the possibility of broadcasting Netflix in this territory. Furthermore, there is a widespread tendency of online piracy in this country, which also does not increase the demand on company’s proposition in the eyes of the population (JOSHI). However, Netflix declares its readiness to adapt to the requests and capabilities of members of the developing market in which it operates.
The catalog limiting is another significant challenge that does not allow Netflix to become an Indian leader in the sphere of entertainment. For India, not all the movies, programs, and shows popular and highly-rated in the US are available. That is due to difficulties in licensing overseas products and adaptation to local laws regarding broadcasting. For example, among the content proposed by the company, there is no such famous series as House of Cards, which earned for Netflix, a significant number of subscribers in the home country. Naturally, when Indian audiences subscribe to Netflix, they expect to see other such well-known serials and films, but instead, they are disappointed. Moreover, the asking price becomes unreasonable, because people in India pay for content as much as residents in the US, and get much less for their money and feel cheated. Besides, under such conditions, Indians are more inclined to trust national campaigns, which are alternative options. Although local Hooq and BoxTV are much less known and qualitative, they offer similar services, which are not only much cheaper but also broadcast in the national language (Rajan). Of course, Indian companies can not compare with the exclusive content and the world population of Netflix, as well as with the unquestionably high quality of the services offered, but in this situation, they can create additional competition that will make its position not so profitable.
Another more severe and dangerous competitor for the entertainment company is a compatriot online store Amazon. In contrast to Netflix, it came to the Indian market much earlier and by this time has already managed to gain popularity and demand from the local population, not meeting such significant problems on the way. Amazon competes with such considerable local e-commerce companies as Flipkart, beats annual sales figures, and is rapidly increasing its capital. In this situation, Netflix, as another American company that claims a significant part of the profits gained in the Indian market, has apparent difficulties in promoting its products (Madhavan). Thus, a year after the launch of Netflix in India, Amazon recalls that the place of the entertainment company is not as stable as it may seem and that other foreign competitors can hamper its development.
But despite all the above difficulties, Netflix plans to prepare its business strategies further for implementing in developing markets. First of all, the company focuses on the consciousness of new products, 10% of investments for which will be directed to the original content. Also, it is planned to increase the total expenditure for production. Another part of the funding will be spent on the creation of their studios in new locations. In addition, Netflix is going to improve technology. The changes will affect the increase in traffic and the use of open content to better the streaming experience. In the field of analytics, Netflix is set to aim at what the client wants. Using the results of data mining, the company strives to facilitate for users the process of searching for content and splits it into genre categories. Finally, the company follows linear extensions to create new channels (Jalan). All these strategies together create a real opportunity to cope with the challenges.
Overall, after the launch in India, Netflix faced many challenges that hampered its successful development. Among the economic difficulties were problems in the implementation and processing of payments, as well as a high price for the region. In the cultural aspect, it was difficult to overcome the language barrier and concerns about censorship. Other difficulties relate to the slow Internet and the issue of content licensing. However, if Netflix manages to solve these main apparent problems and implement its planned business strategies, it stands a good chance to become a leading company in the entertainment market of India.
Jalan, Ram. “Netflix Business Strategy And Future Readiness.” Linked In, 2016, https://www.linkedin.com/pulse/netflix-business-strategy-future-readiness-ram-jalan.
JOSHI, SONAM. “Netflix’s India Launch Greeted With Excitement, But Sceptics Remain.” Mashable, 2016, http://mashable.com/2016/01/07/netflix-india-launch/#TBDUkesidkqw.
Madhavan, Abhishek. “HOW NETFLIX LOST BIG TO AMAZON IN INDIA.” Wired, 2017, https://www.wired.com/2017/01/how-netflix-lost-big-to-amazon-in-india/.
McAlone, Nathan. “4 Things That Could Hurt Netflix In Its Quest To Take Over The World.” Business Insider, 2016, http://www.businessinsider.com/4-challenges-to-netflixs-international-expansion-2016-7.