Will Netflix's mobile 'sachet' packs change the OTT game?

Netflix announced its mobile-only 199 pack for India; we spoke to Jehil Thakkar of Deloitte, Girish Menon of KPMG, Ashish Pherwani of EY and PwC's Raman Kalra to understand the implications in the OTT space.

In 2010, Netflix rolled out its streaming service in Canada, for the first time outside of the US. Canadians could subscribe to Netflix for CAD $7.99 a month. Netflix CEO, Reed Hastings was quoted by broadsheets saying - "The lowest, most aggressive price we've ever had." Cut to July 24, 2019, Netflix launches a mobile-only pack for India at Rs 199 (US $2.89) the lowest in the world... what will he call this? Well, welcome to India!

The streaming giant is now available in 190 countries and claims to have 151 million paying subscribers. Throughout the world, it retained a similar pricing strategy spread across three packs - Basic, Standard and premium. India is the first country where the California-headquartered entertainment company rolled out a mobile-only pack. "Our members in India watch more on their mobiles than members anywhere else in the world and they love to download our shows and films. We believe this new plan will make Netflix even more accessible and better suit people who like to watch on their smartphones and tablets - both on the go and at home," said Ajay Arora, Director, Product Innovation, Netflix in an official media statement.

Various subscription plans of Netflix in India
Click on the image to enlarge

What also should be taken into consideration is Netflix's Q2 earnings report. The streaming giant saw its shares fall by more than 10 per cent after reporting a net addition of 2.8 million international subscribers much lower than its own forecast of 4.8 million. Netflix trades on international growth and intends to bounce back in the third quarter, with an estimated gain of 6.2 million international net adds. India, especially after the launch of new mobile pack could play a role in Netflix achieving its targets with the second season of "Sacred Games" slated to launch along with new seasons of global hits 'Stranger Things', 'Orange is The New Black' and 'The Crown' among many others.

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It is not only Netflix which is sweating it this summer, A PTI report claimed that Zee Entertainment Enterprises' video on demand platform - ZEE5 is also toying with the idea of launching a mobile-only subscription pack. Earlier this year Amazon Prime Video rolled out a monthly pack for Rs 129 while earlier it only had Rs 999 per year subscription pack in India. Now acquired by The Walt Disney, Hotstar had also introduced a segmented offering 'VIP Pack' for Rs 365 per year 'Premium' pack costs Rs 999 a year or Rs 299 a month.

So with the announcement of its mobile-only-199 pack for India, we were curious to know if this 'sachet' service will change the OTT game. Here's what some of the experts we spoke to had to say:-

Jehil Thakkar, Partner at Deloitte India

Jehil Thakkar

The fact is that India is a mobile-first country, 83 per cent of India accesses video content on the mobile. If you are to address an audience like this and be in a price segment that allows for a larger market, then various combinations of plans that various segments of society find palatable is something that most OTT players will do. You have to remember that India is a 98 per cent single TV household country. If you have a teenager in the house who wants to access OTT content, they will largely watch on mobile. What a pack like this does is it address different segments of the market, therefore, expanding the target market for the OTT players. Different segments are willing to pay different prices and are willing to make sacrifices. I believe mobile-only packs from OTT platforms will help them get new customers in India.

Ashish Pherwani - Partner and Head, Advisory, Media and Entertainment, EY India

Ashish Pherwani

Girish Menon

India has always been a market known for sachet-sizing and pricing and so it was inevitable that such products were rolled out for the entertainment industry as well. My opinion is that we will see more of it. Whenever the sachet theory is applied, be it for entertainment, perfumes, shampoos, it increases the customer base. A lower price point is always going to appeal to a larger base of people. Sachets enable a higher quantum of trial and are effective marketing tools.

Girish Menon - Partner and Head, Media and Entertainment, KPMG in India

When you look at platforms like Netflix, it was at a minimum Rs 500 per month in India and, therefore, was far more expensive than any other platform in the country. The problem with international players like Netflix is they cannot reduce the price only for India. They have a similar price point followed all around the world. At the same time, international players are well aware that at Rs 500, 600 or 700 per month, there won't be too many people subscribing in India. So they are trying to figure out a way to reduce the price while also making it a different offering. The benefit of doing this is the US subscribers cannot say that India is paying less for the same service while we are paying more. I think they are starting this mobile-only pack with India and gradually they will roll it out in the rest of the world.

From an India perspective, it is a mobile-only market. The international OTT platforms know that by this mobile-only pack, they can reduce the pricing and hopefully get more consumers to come on board. From a consumption perspective, not much is changing. Even from the people who currently pay for Netflix, a lot of them watch it only on the mobile. In terms of consumer targeting, nothing changes. What changes is the product, that becomes more affordable for consumers and, therefore, hopefully, the OTT platforms' view is that there will be greater traction of paid consumers that will come on broad.

Raman Kalra - Partner/Leader - Entertainment, Media & Sports Advisory, PWC

Raman Kalra

If I am a user who always watches on mobile, then why should I pay for those features which I am never going to use? The whole focus in India, at this stage, is on micro-segmentation and individual targeting and then delivering content as per the needs of the customer and pricing it accordingly. As we go forward, we will see more innovative pricing; there will soon be differentiated pricing for regional content, there could be separate pricing for separate genres. The OTT platforms, not only Netflix but the others as well, need to create micro-segments of consumers and understand their propensity to pay and then price accordingly. This is the only way for them to expand their reach in India.

The pricing strategy is a means to get to the next wave of growth and this will definitely bring new subscribers into the service. But that is not the end... the challenge then will be to ensure stickiness. Creating and recommending the right kind of content will be essential. There is a segment of consumers who have been more price-sensitive and have not subscribed to Netflix because of the pricing base, they might just subscribe now. I won't be surprised if there is a student plan tomorrow. Spotify already has it and the OTT players could also roll out a student pack. This is just the beginning and we will see many more such packs.