Netflix misses subscriber target, but up beat about India growth
Online video-streaming giant Netflix missed its global target of adding 6.2 million subscribers in the quarter ended June 2018, but reiterated that the fundamentals of its business remained strong and that it had a lot of room for growth in the Indian market.
In a call with investors post its second-quarter earnings on Monday, the California-headquartered firm said it was still exploring options in India, which held immense potential for its growth.
“There are 3-4 different sorts of growth patterns within India in terms of different demographics, segments and groups,” David Wells, CFO of Netflix, told the investors.
Netflix, which made a foray in India in January 2016, launched its first original film targeted at local audiences — Lust Stories — only in June 2018. The four-part film became its most-watched original in percentage terms in any individual market in the first month.
Netflix also said its original series “Sacred Games”, directed by Anurag Kashyap, was also off to a similarly strong start. A third original “Ghoul” will be launched on August 24.
“I would say we’re far from reaching a limit in terms of the addressable market given the pricing structures we have right now, we've got a lot of room to grow in a reasonably affluent part of the society in India and other markets around the world,” said Greg Peters, chief product officer at Netflix.
The company has turned its attention on India at a time when rival Amazon is focusing massively on local content to grow its prime subscriber base in the country.
While the e-commerce giant launched its first original series last year, it plans to launch six more this year, and 10 original shows next year.
It also offers its prime subscription at just ~999 for a year, compared to a starting price of ~500 that Netflix charges per month.
But Netflix’s focus on India isn’t just to counter Amazon’s growth but to drive subscriptions and revenues from the country in the near future. India has an Internet base of 500 million users. Though not all of those are currently addressable by Netflix, the company says it wants to get there in time.
While YouTube and Hotstar continue to dominate Indian online video-streaming market, there’s enough room to disrupt the massive traditional TV-viewing market and bring that online, said the company executives.
“We’re still a niche product (and) we’ve got a long way to go to expand languages and many other aspects to able to be a broad Indian product,” said Peters.
However, while Netflix painted a picture of abundance of growth, driven by countries such as India, investors nixed the company’s stock price by 14 per cent in early trading hours for signing up one million fewer subscribers in the second quarter than it had earlier projected. This came despite the company growing profits by nearly six times to $384 million year on year in the second quarter on a revenue of $3.9 billion.
Netflix said it had over-forecasted subscriber growth in the second quarter after continuously under-forecasting its growth in the previous 10 quarters. In the current quarter, the company has projected to add 5 million subscribers, backed by aggressive programming and marketing investments.
In 2018, the company plans to spend $8 billion towards content and $2 billion on marketing its services globally.