In the earnings call, Netflix attributed the slowing growth to several factors. The pandemic had badly affected Latin America, one of Netflix’s key growth markets. Competition from the likes of Disney+ was cited as another major factor. 

But then, right at the end, Netflix CEO Reed Hastings said this.

Three years later, Netflix is still trying to figure out how to win in India. 

All this despite the fact that in 2021, Netflix continued to do what it did three years ago, but with greater ferocity. 

Its investment into content in India was bigger than ever. 

It dropped prices even more. 

And it introduced another mobile-only plan. 

Clearly, something isn’t working for Netflix in India. 

Several theories abound, but there’s an overriding reason why Netflix is struggling here. 

And it’s not the most obvious reason.

Let’s dive in. 

Right off the bat, you can see that this is just… weird. 

First, the thing that really stands out is Amazon Prime Video’s numbers, which stood at over 17 million in December 2020. Prime rolled out its video service an entire year after Netflix India, but it had managed to get 4X the number of subscribers as Netflix did by late 2020. 

Second, there’s Disney+Hotstar, which has even higher subscription figures, but we’ll come to that later. 

Third, and more astonishingly, is the growth curve. Both Amazon Prime Video and Hotstar seem to be adding subscribers at a healthy rate, but Netflix India is practically flat. 

But Praveen, you’ll say, this is not at all that surprising because—

Fine, go for it. Make your case. 

Disney+Hotstar’s subscriber numbers are much higher than its competitors because it has better content than its competitors, including HBO shows like Succession and most of the Marvel movies. All of this gives it an edge, but that’s nothing compared to the biggest weapon it owns—the exclusive rights to live broadcast the biggest sporting event in the calendar, the Indian Premier League (IPL). Netflix can spend millions of dollars creating the best content it can muster across India, but there’s nothing it can do to come even close to what the IPL does for Disney+Hotstar every year. 

Sumner Redstone is a media mogul who passed away sometime last year at the age of 97. Redstone was known for two things—first, he was the person who created, built, and ran the massive conglomerate that later became ViacomCBS. This in itself is an incredible, astonishing accomplishment. 

Second, Redstone coined a phrase to describe the guiding principle with which he had built one of the most formidable media empires the world had ever seen. It’s an immortal phrase that has since been repeated over and over again, in multiple contexts, by people usually in the entertainment and media industry.

Content is king. 

He was the first person to say those three words, in that specific order. 

There’s a short interview of Redstone in the Archive of American Television where he goes into a little more detail about what he meant by that phrase when he created it. You can watch it on YouTube. Here’s how he describes it, in his own words. 

No streaming platform illustrates this better in India than Disney+Hotstar, and the IPL.

Also, the other thing that Bill Gates clearly understood was that because it was all software, the internet expanded the definition of content. 

Software can do many things. 

It can help send videos to your phone.

It can play music. 

Most importantly, it can make products that you’ve ordered off a website cheaper and deliver them to you faster. 

According to a report published by a consultancy firm Redseer, just 30% of Amazon Prime’s subscribers use it to watch videos. Presumably, the rest use it to buy stuff off Amazon at exclusive prices with faster delivery. These are really valuable customers. As I’ve written before, over 50% of Amazon India’s gross merchandise value (GMV) comes from a few million Prime customers. This is a small, but extremely loyal base of users. And video is not the main reason why they’re subscribed. 

For Amazon, ‘content’ is king, but the definition of what content is is much broader.  

This is one argument why both Disney+Hotstar and Amazon Prime Video have more subscribers in India as compared to Netflix. The content argument.

Then, there’s the pricing. Both Amazon Prime Video and Hotstar are priced much lower than Netflix. In early 2021, depending on the plan, a subscription to Netflix in India was anywhere between Rs 199 to Rs 799 a month (~US$2.7 to US$11). Prime’s pricing stood at Rs 80 to Rs 129 a month (~US$1 to US$1.7), and Hotstar, while a bit more expensive than Prime Video, was still lower than Netflix. 

Combined, both content and pricing explain why Disney+Hotstar and Amazon Prime have several times the subscribers that Netflix has in India. 

Except it doesn’t. 

The first part where things start to look shaky is the pricing. Sure, we know that both Hotstar and Amazon Prime are at a lower price, which is presumably one of the reasons why we think they have an order of magnitude more subscribers than Netflix does. 

But last year, when Netflix was slashing prices to historic lows in India, did you know what Hotstar and Amazon Prime did?

Both of them increased their prices. For the first time in years. 

Disney+Hotstar rolled out its first price hike in August, and Amazon Prime followed suit in December. And notably, neither of them offered additional products to customers for the higher price. They just raised prices for the same products (more or less). 

Granted, even after the raise, their prices were lower than Netflix. But it does beg the question—if all one needed to do to get more subscribers in India was to slash prices, as Netflix did, then why did Disney+Hotstar and Amazon Prime go in the opposite direction in the same year? Why take that risk at all?

Then, there’s the small issue of the number of subscribers. 

A few months ago, I wrote an edition breaking down India’s consumer base, where I described it as a pyramid. At the top of the pyramid, I wrote about a segment of customers called India’s California Customers. Here’s how I described them.

Well, the answer lies in another report which breaks down the performance of India’s OTT players—not by subscriber, but by income. Omdia, which published the report, indicated that nearly 78% of all streaming revenue from India in 2020 was taken in by just Disney+Hotstar and Netflix. 

What’s the split between these two companies?

Well, Omdia didn’t publish the details, but a few sharp analysts did some back of the envelope math and here’s what it looks like. 

How is this even possible?

Well, it’s all thanks to something that both Disney+Hotstar and Amazon Prime Video have cracked, but Netflix hasn’t. 

Distribution. 

The one thing that’s common to both Disney+Hotstar and Amazon Prime is that they bundled their subscription with telecom service plans from players like Jio and Airtel. Plus, they added distribution through other methods such as cable or fibre. The idea is essentially this—telcos go to customers and convince them to recharge, and they throw in an OTT subscription for free. Between the telcos and the OTTs, there’s a revenue share model. 

Back in October 2020, one report estimated that out of Amazon Prime Video’s 10 million subscribers, just 40% of them actually pay for their subscription. The rest of them have access thanks to some bundle plan—usually via a postpaid or a broadband connection. 

Most estimates put the number of postpaid customers in India at somewhere between 50-70 million. 

When both Sumner Redstone and Bill Gates, in their own ways, said that content was king, they were implicitly saying that distribution of that content wasn’t as important. 

For Redstone, who understood network television and radio, distribution was a commodity, while content was a differentiator.

And for Bill Gates, in the internet era, distribution had no marginal cost. 

Turns out, in the context of online content distribution in India in 2021, both of them were wrong. 

You can have the best content at the best price, but the way you get to as many people as possible and widen your market is through distribution. That’s what Hotstar and Amazon Prime understood, and where Netflix fell behind. Sure, you can argue that Netflix may have cornered the money. But remember that Hotstar has the users—which it can show ads to and monetise that way. 

The real lesson here is that content may be king. 

But distribution is God.