Why Netflix Thinks It Won't Have To Reduce Prices In India

Netflix launched in India two years ago and has won fans among a young, tech-savvy middle class

Netflix chief executive Reed Hastings said that the streaming video company had no plans for cheaper prices in the hotly competitive India market and that an executive's comments suggesting otherwise had been "misunderstood."

In an interview with Reuters on Friday, Hastings noted that Netflix had three price tiers in India: 500 rupees ($6.90) for a basic plan, 650 ($9.00) for a standard plan and 800 rupees ($11) for premium. Those prices are only modestly lower than what the company charges in the United States.

But in India, Hastings said, "we see the typical mix across these three plans that we see in many other countries like the U.S., which would indicate that we don't have a pricing issue. Because if it was, everyone would be on the lower price plan."

When asked directly if that meant the company had no plans for lower prices in India, he said: "Correct."

Hastings' comments followed a Singapore event where the company introduced 17 new original productions for Asia, including nine for India. He said local production was a key driver of new subscribers in India and elsewhere, but he declined to provide specific figures on Asia subscriber numbers and growth.

Netflix launched in India two years ago and has won fans among a young, tech-savvy middle class in a country where video consumption of all kinds is soaring. It scored a big hit in July with the release of "Sacred Games", a hard-boiled thriller built around Bollywood star Saif Ali Khan.

Local industry players, however, say Netflix's prices will make it hard to compete against domestic competitors like 21st Century Fox-backed Hotstar, Amazon's Prime Video and satellite TV provider Tata Sky.

But Hastings said Netflix could still thrive amid cheaper options.

"Now it is true that Youtube is free, and Amazon is basically free, and cable is extremely inexpensive because it's ad-supported. To some degree that creates a consumer expectation," he said. But he added that the cost of Netflix in India was "like going to the movie theatre 2-3 tickets a month, but you get to watch a lot more."

PRICING EXPERIMENTS

Following Netflix's October earnings announcement, chief product officer Greg Peters said: "We'll experiment with other pricing models, not only for India, but around the world that will allow us to broaden access by providing a pricing tier that sits below our current lowest tier."

That was widely understood to signal that a low-price plan was coming to India. But Hastings said that was not the case.

"It got misunderstood as a decision that we are going to have lower prices in India, which is not something we are particularly contemplating," he said.

Hastings acknowledged the limitations of the current pricing strategy in a country where per-capita income is a tenth of that in the United States.

"It's true that if you're trying to get to a billion households, that probably wouldn't work," he said. "But if you're focused on English-language, English-entertainment households, there is a much higher income."

He called the high-end focus "a practical, realistic" place to start and that the company eventually hoped to target a broader audience.

Netflix currently has more than 130 million subscribers worldwide. Hastings has said the India market could deliver the next 100 million subscribers.