“We have had enough success in Japan and South Korea for you guys to think about it like Germany or France, like it’s a big developed rich market. We have got that wired. [In] India, we are still figuring things out,” Reed Hastings, Netflix co-CEO, said in an earnings call on Wednesday morning. While India is among the cheapest places in the world to get a Netflix subscription — without even taking into account the mobile-only plan — its pricing and adoption hasn’t grown to a point where investors take the company too seriously as a short- or mid-term revenue opportunity. “And so that investment takes some guts and belief forward-looking,” Hastings added.
In Q1 2021, the company missed its target of adding 6 million users, only adding 4 million new subscriptions. Netflix cited a thin H1 2021 due to the pandemic as the reason (a lot of 2020’s content slate was substantially ready before the pandemic). “In the short-term, there is some uncertainty from Covid-19; in the long-term, the rise of streaming to replace linear TV around the world is the clear trend in entertainment,” Netflix said in a letter to shareholders.
- Shooting again everywhere except India, Brazil: “While the roll out of vaccines is very uneven across the world, we are back up and producing safely in every major market, with the exception of Brazil and India,” Netflix said in an earnings call, reflecting the sheer scale of the second wave of the COVID-19 pandemic in India.
- India a “speculative investment”: Hastings side-stepped a question on whether the company would be able to cut subscription prices in India and “play the kind of low ARPU high-volume strategy”, or if they would just wait for people to start earning more money and begin to afford a Netflix subscription. “I think on that, we are still learning,” Hastings said. “I would say we are still mostly focused on getting a content fit and getting broader content. So that’s why I would say that one is a more speculative investment than, say, Korea or Japan, which again, 5 years ago was very speculative when we did those.”
- Sachets! The company’s COO and Chief Product Officer Greg Peters entertained the concept of “sachet” subscriptions, invoking the strategy employed by shampoo manufacturers to peddle their wares in low-income households. This is pretty significant language if it goes anywhere, as it could signal a shift from a monthly subscription-0nly strategy to something a little more flexible. “Our job is to really try and be innovative and push an experiment, whether that is pushing on the actual model in terms of like multi-month or sachet and sort of explore the ranges of that kind of offering,” Peters said, adding that for the moment partnerships with telcos like Jio had worked well for the company, with similar arrangements being a good way to enter the market globally.
- India a great opportunity, but a challenge: Co-CEO Ted Sarandos was quick to punctuate his colleagues’ views on the Indian market with a bit of confidence: “I’d just add that India is a tremendous opportunity,” he said, adding, “And it’s just like all great opportunities. It’s a long journey, and it’s a challenge. And we think it’s worth it. And that’s why we’re investing early and trying to stay ahead of it. And I think we will be able to see those kind of results that we’ve seen in other places in the world.”
Financial Snapshot — Q1 2021
- Revenue: US$7.16 billion, up by 24.2% YoY
- Operating income: US$1.96 billion, up by 104.6% YoY
- Subscribers added: 3.98 million, down 74.76% YoY
Letter to Shareholders with Results | Transcript of Earnings Call
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