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Netflix a damp squib; broadcasters long term gainers: Edelweiss

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MUMBAI: While the world is going gaga over Netflix?s simultaneous launch in 130 countries across the globe including India, financial services company Edelweiss is not too impressed, at least in the medium term.

 

So when all and sundry are trying to predict and second guess the impact Netflix?s launch will have on the over-the-top (OTT) scene as well as on the broadcast industry in India, according to Edelweiss, the impact of Netflix in India will be limited on direct to home (DTH) and cable TV players over the medium term.

 

Citing the reasons for the same, Edelweiss lists:

 

1) Netflix does not have local content

2) Free content is easily available on Erosnow, Hotstar, YouTube

3) Steep pricing at 2-3x prevailing cable TV/DTH rates

4) Broadband speed beyond top cities will be a huge challenge

5) Lack of India cricket matches

 

The Indian pay TV market is on its way to embrace OTT platforms, especially for sports content, following increasing usage of internet. According to the company, this will be an additional source of revenue for broadcasters like Zee, Sun TV and TV18 over the longer term. ?However, most broadcasters already have their OTT platforms and are yet to sign content deals with Netflix,? the company said in its report.

 

A successful OTT in US:

 

Netflix is a successful OTT in US as cable TV ARPU is $60 per month versus Netflix?s ARPU of $20-24. Secondly, the US has higher broadband penetration (~80 per cent) with good speed; and original content is dished out by Netflix. However, in India, Netflix currently lacks these advantages.

 

?Hence, we do not expect Netflix to have any major impact on Indian DTH/cable TV players over medium term. Netflix has a long way to go before tasting success in India,? Edelweiss said.

 

Pricing, slow broadband key challenges in India:

 

As was reported earlier by Indiantelevision.com, in India, Netflix?s subscription rates are Rs 500, Rs 650 and Rs 800 for basic, standard and premium packs respectively. ?These are 2-3x the prevailing cable TV/DTH rates. Besides, broadband will entail additional costs,? the report added. 

 

Internationally, Netflix has done well riding attractive pricing, which is almost half the cable TV/DTH rates, and original content. While the company currently does not enjoy these benefits in India, in a bid to attract subscribers, it is offering free services in its first month of operations. 

 

According to Edelweiss, plans are also afoot to facilitate streaming via laptops, TV, smart phones and tablets. ?However, we believe in India where subscribers pay ~Rs250-450 per month for cable TV (includes sports channels), Netflix?s rates are on the higher side. Broadband speed will also be a challenge. Netflix requires minimum speed of 512kbps and recommends 3mbps speed for SD content and 5mbps for HD videos, which further limits its expansion plans,? the report said.

 

Sports missing, India savours diverse content:

 

Netflix is currently beaming international TV shows in India along with English and Hindi movies. ?The company is currently not offering local content. Sports content, the main driver of the OTT platform, is also not offered. With India being a country with diverse culture it consumes content in eight different languages. Currently, Netflix is beaming only English content which will attract only niche audience,? the report added.

 

With Netflix?s subscription price being by far the steepest in India as compared to competition, some of whom even offer content for free on their platform, it remains to be seen whether other players up their price, match Netflix?s or continue to offer content at a lower price. That said, with growing competition in the space from the likes of Arr?, ALT Digital, DittoTV, ErosNow, HOOQ, Hotstar, Netflix, nexGTV, Sony Liv, Spuul, Voot and YuppTV, Netflix?s content strategy in the near future will be the key differentiator, which will separate the best from the rest.

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