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  • Netflix has become a staple on American households.

  • So it might be hard to believe that the majority of its 137 million subscribers are international.

  • The streaming giant has expanded to over a 190 countries, but one country where Netflix has had difficulty breaking through is India.

  • Both Netflix and Amazon Prime Video launched in India in 2016.

  • Thanks in part to the drastic drop in mobile data prices.

  • Streaming services which were once considered a luxury suddenly became increasingly more appealing to Indians.

  • India is now the second largest internet market in the world following China.

  • More than 35 different streaming services have launched or expanded their businesses in India in the last three-and-a-half years.

  • One company that streams Cricket and Indian movies and shows called Hotstar is leading the race.

  • Research firm Jana estimates Hotstar holds about 70% of the on-demand local streaming services market.

  • Even Amazon Prime video is bigger than Netflix in India.

  • And India's online video market valued at over $700 million is expected to grow to $2.4 billion in value by 2023.

  • But according to analysts, Netflix is not grabbing a huge piece of that pie.

  • We think that Netflix likely has somewhere between half a million and a million paid streaming subs in India right now.

  • Pricing might be one reason Hotstar has had an edge on Netflix.

  • Hotstar offers its premium service for about $3 a month in India and about 80% of its catalog is free to begin with.

  • Amazon Prime costs about a $1.90 a month including access to Prime Music.

  • Compare that to the cheapest plan that Netflix offers which is a little over $7 a month.

  • Hotstar also offers streaming rights to the majority of Cricket tournaments in India, the country's most popular sport.

  • Earlier this year, 10.3 million viewers tuned into Hotstar to watch the finale of the Indian Premier League tournament.

  • Facebook even offered to pay more than $600 million for the IPL's digital rights but lost out to Star India which owns Hotstar.

  • It's worth noting that Netflix has purposefully stayed away from streaming live sports in the United States.

  • It's a strategy that's worked well so far domestically but it remains to be seen if it will work in India.

  • Then there's the hunger for local content, here again Hotstar has an advantage.

  • Because it's been able to provide shows in regional languages which it borrows from channels operated by Star India, its parent .

  • But Netflix has taken note of the demand.

  • We'll go from expanding, you know, beyond English into Hindi and then into many more languages, more pricing options, more bundling, all of those things are possible.

  • So we'll take it, you know, a million at a time and figure out how to expand the market as we grow.

  • Despite India's challenges, part of the reason investors have given Netflix its God evaluation is precisely because it has room to expand.

  • It's been an awesome growth story and it will continue to be an awesome global growth story as they expand into Asia, India and some of the international markets.

  • So our evaluation right now is $420 a share, that's progressed upward over time.

  • And we think that given that global runway it's likely to continue to go in that direction.

  • It'll take time for Netflix to build up its presence.

  • We have generally seen historically it take about three years for Netflix to achieve 10% household broadband penetration.

Netflix has become a staple on American households.

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Why Netflix Is Struggling in India

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    Liang Chen posted on 2019/01/12
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