Is Netflix losing its crown?

Netflix’s decade of uninterrupted expansion dramatically came to a juddering halt and appeared to go into reverse after it revealed that it lost 200,000 customers in January-March this year and could lose 2 million more in the coming months. On 19’th April the share price of Netflix faced a fall of over 35% causing the company to lose more than 50 billion dollars in the international market. Netflix is blaming the slowdown on post-lockdown shift to normality. It also is holding sharing passwords, rising inflation and its decision to quit its services in Russia (due to Putin’s invasion in Ukraine) accountable for this decrease in revenue.

The decision of quitting its services in Russia caused a loss of over 7 lakh subscribers to Netflix. But this was just the beginning. Soon after, it lost over 15,00,000 subscribers in the UK. A survey done showed that the residents of UK cancelled their subscription due the crippling inflation. The cost of living was rising continuously and therefore people reduced spending on entertainment to save a few bucks. There are 220,000,000 Netflix users world-wide. Approximately 100,000,000 of these users share their account password with other members of their family. On top of that, 3 million out of the 10 million users were citizens of US & Canada. These 2 countries are the two most important regions for Netflix as they are its highest - income markets and they pay almost double the subscription charges as compared to India. The catch here is that Netflix was aware of this situation still let people to share passwords so more people can experience its services. So once people get in a habit of watching Netflix, people will automatically buy an account for themselves. This strategy failed drastically as people used third party applications/mods to access Netflix’s paid content for free. Password stealing also became quite common.

Now talking specifically in terms of the Indian market. This was the market which was the hardest to penetrate for Netflix due to several reasons. The OTT market has two divisions, Advertising video on demand (AVD) & Subscription video on demand (SVD). In advertising video on demand, an advertisement is displayed while the video is being viewed,

although most of the content can be viewed for free. Subscription video on demand, on the other hand, requires the user to pay a fee to access premium content. The AVD market in India is considerably larger, with a total revenue of $1.1 billion (2021), than that of the SVD market, which has a relatively smaller revenue of $800 million.

Non-metropolitan cities account for 63 % of India's video consumption audience, where affordability is a major issue. Platforms such as YouTube are extremely popular in these regions since buying the premium version of the platform is optional. Outside of India, money is usually traded for saving time, but it is the opposite here in India. Since incomes are low, people trade time for money. As a result, to grow, an OTT platform must include AVD services.

According to a research conducted by Accenture, 74% of Indian consumers said that Netflix's prices were unreasonable for the content available online.. To put this in context, the basic plan requires a user from Canada to pay 765 Rs ($10) whereas a user from India pays 150 Rs for the same. One might believe that the prices in India are significantly lower but that is not the case. As the statistics below demonstrate, the annual amount spent by an American on purchasing a Netflix membership is more than that of an Indian when expressed as a proportion of GDP per capita. Even while the plan appears to be less expensive for Indians, it is more expensive in terms of GDP per capita.

​Country	​INDIA	US
Average Annual Expenditure on Netflix	1500 Rs	8000 Rs

Country	India	US
​Exp. as percentage of GDP per capita	1%	0.19%

Netflix also admitted that it is facing vigorous competition from platforms such as Amazon prime and Hotstar. Netflix has a measly 5.5 lakh accounts in India

whereas other streaming platforms such as Hotstar and Amazon prime have 4.6 and 2.2 crore accounts respectively. This difference is present due to many reasons. Apart from pricing the main factor being that Netflix has no content in regional languages,

the content available for India is not according to the taste of the Indian audience. Amazon prime and Hotstar have better suited content for the Indian audience. Amazon prime also bundled its subscription with other services such as free delivery, amazon music etc. Hotstar not only has more regional content, but it also allows its user to view sports matches live. Due to cricket being an extremely popular sport, this helps attract more consumers to subscribe to the platform. The added value of these platforms is higher than Netflix as it has no availability of a complementary service which makes it less attractive for many potential consumers.