Can Netflix’s Partnership With Jio Revive Its Indian Streaming Dreams?

When Netflix forayed into India at the outset of 2016, its senior executives flagged slow internet speeds as one of the key hiccups to its penetration. However, all of that changed in a few months as Reliance Jio waltzed into the telecom arena. 

The telecom war spurred the rise of data consumption and penetration of high-speed 4G internet services across the country as telcos offered data at dirt-cheap prices. Seven years later, it seems life has come full circle for the two companies as Jio and Netflix have announced a new offering that has the potential to rejig the streaming space.

For the first time in India, Netflix has partnered with a telecom company to offer prepaid tariff plans bundled with a subscription for the US-based streaming major. While Netflix has largely played it safe so far, targeting standalone subscribers and postpaid users, its latest move could spur its India numbers.

To summarise briefly, Jio has launched two prepaid plans priced at INR 1,099 (2GB/ day) and INR 1,499 (3GB/ day) with a validity of 84 days. The former comes embedded with the Netflix (mobile) plan, which sells for INR 149 a month, while the latter includes the ‘basic’ plan of Netflix, which is worth INR 199 per month.

While the INR 1,099 plan will offer Netflix subscription worth INR 447 over a period of almost three months, the INR 1,499 plan will enable users to avail INR 597 worth of services. To put things in perspective, Jio’s current 2GB per day data plans with 84 days validity sell anywhere between INR 719 to INR 749. On the other hand, Jio’s 3GB data per day plan for 84 days cost INR 999. 

While the details of the financial partnership are not known, Jio and Netflix are banking on the playbook of offering bundled offerings at small concessions to woo new customers. 

However, the stakes are much higher for Netflix, which has lately undertaken multiple changes at its India operations with an eye on alternate revenue streams. The streaming company has partnered with a host of companies and is looking beyond price as a way to increase the number of users. With the latest partnership with Jio, Netflix is looking to hook the users of the telecom operator, offering them a taste of global shows as well as some vernacular content. 

Can Netflix Capitalise On Jio’s User Base? 

Netflix’s previous partnerships with telecom operators only targeted postpaid customers, who accounted for just 8% of the total telecom subscriber base in the country at the end of March 2023, thereby limiting its reach.

The new partnership with Jio will open up a huge swathe of prepaid wireless subscribers for Netflix. Jio, which commanded a market share of 38.17% in the Indian telecom space as of May 2023, is expected to serve as an acquisition channel for Netflix, which so far has failed to zero in on a strategy in the country to shore up its user numbers. 

The partnership with Jio will offer Netflix a direct entry in the subscription slab and ensure that the telecom operator’s users scroll through the bundled offerings whenever they buy a plan. 

The bundled offerings will also make Netflix’s content more accessible to the masses and the streaming giant can skip forging partnerships with multiple stakeholders to push its services.

This mirrors the playbook of ALTBalaji and Eros Now, both of which debuted their shows for free on Jio Cinema and Jio TV to gain traction and popularise their respective platforms. Reliance owns a stake in both these companies. 

The collaboration with Jio will also help Netflix build a different revenue model where it banks on Jio’s network of dealers to get revenue through mobile recharges in a country where penetration of online payments and debit cards is still low. 

Netflix also plans to leverage the data-guzzling Indian population, which spends a good chunk of its days viewing shows on streaming platforms. As per a report by Eros Now and KPMG, an average Indian viewer spent around 70 minutes per day on OTT platforms. 

As per Reliance’s Q1 FY24 results, the per capita data usage of Jio users stood at nearly INR 25 GB per month, offering Netflix a window to capture these content-crazy subscribers. 

The move will also enable Netflix to shed its image as a predominantly Gen Z and millennial offering and open the floodgates for other demographics to experience the streaming service. 

The partnership appears to be a win-win situation for both players, especially for Netflix which can bank on Jio’s infrastructure, billing system and customer care to build a better customer experience while attracting more user eyeballs.

On the other hand, it will also enable Jio to keep customer churn lower. 

“Netflix has strategically introduced an INR 149 plan catered specifically for mobile users. The bundling strategy not only helps OTT players and aggregators in garnering substantial viewership figures but also synergistically aligns with the core offerings of both products, it’s like a win-win for both,” Avinash Mudaliar, cofounder and CEO of content discovery platform OTTplay, told Inc42. 

Netflix’s India Problem

India has been a challenging market for the US-based streaming giant for a long time. In 2021, its founder and co-CEO Reed Hastings said that the company was still trying to figure out the product-market fit for India even as it potentially spent about $400 Mn in the country since 2019.

Since then, Netflix has slashed corners, cut subscription prices and unveiled a host of locally produced shows to attract the predominantly vernacular audience in the country. While it burned a lot of capital on expensive productions, banking on premium content and lower pricing, its competitors were the first ones to tap into the bundled offering ecosystem to woo customers. 

While Amazon bundles its streaming service with free music and free deliveries through Prime, along with partnerships with Airtel and Vodafone Idea (Vi), Disney+ Hotstar has leveraged its partnerships with broadcasters to bring in a larger library of vernacular content and premium English productions to the country. Besides, the lack of cricket streaming in a country which is crazy for the game has also slowed down Netflix’s growth.

Disney+ Hotstar, which has digital rights for many cricket tournaments despite losing the rights for Indian Premier League (IPL),  was one of the first companies to partner with all three major telecom operators – Jio, Airtel and Vi – to offer bundled subscriptions to customers. Meanwhile, Netflix seems to be catching up only now.

The US-based streaming giant now offers its streaming service with postpaid plans of all three major telcos. Netflix has also been bringing more users on its platform, albeit on a smaller scale. It added 7.6 Mn subscribers in Q4 2022 globally as against 8.2 Mn during Q4 2021. In 2022, the company’s India arm saw a 30% increase in engagement and a 25% rise in revenue in 2022. 

It also tweaked its content and pricing strategy in the country and scaled up its local production tally to 100, adding 28 new titles just last year. Alongside, it trimmed the budget of its original content productions in India by 35%-40%, while listing more tent-pole Bollywood movies and South Indian titles to rake in more customers. 

The rollout of the streaming giant’s ban on password sharing in India earlier this year is also expected to bolster revenue. 

However, questions remain about how successful Netflix would be in leveraging Jio’s user base to push its products.

Netflix directly competes with the likes of Reliance’s JioCinema, which has emerged as a key player in the OTT segment since acquiring digital broadcast rights for the IPL and striking exclusive content deals with Warner Bros Co. and NBC Universal. While Netflix is cutting corners, JioCinema has unveiled an INR 2,000 Cr warchest to take on competitors and release as many as 100 movies and shows over the next 18-24 months. 

Produced at a cost of well over INR 2,000 Cr, the movies and TV series span various languages and genres. It is important to note that Netflix still has a long way to go in regional language content in India.

The Bumpy Road Ahead

While plenty of OTT platforms have tied up with telcos in the past, the story has not always been without its own set of challenges. The traditional revenue-sharing models between OTT players and telcos encompass a range of possibilities from profit-sharing arrangements to flat fees, or even minimum guarantee structures.

While a fixed upfront fee model offers a stable monetisation avenue from telcos, a minimum guarantee model may or may not work for smaller OTT players that do not generate significant viewership. However, Netflix, being a big player with a differentiated offering, could have a better bargaining power compared to smaller players in the market.

Meanwhile, as such collaborations grow, the telcos have reportedly largely turned to the revenue-sharing model, especially with smaller players that do not generate significant viewership to reduce minimum guarantee payments.

Not just this, revenues of OTT platforms from partnerships with telecom operators account for nearly 50-70% of the overall revenues of streaming platforms. This could lead to an overdependence on telcos as a distribution channel.

The biggest issue, however, seems to be the affordability of the bundled plans in the price-sensitive Indian market. Only a limited number of telecom customers are likely to spend INR 1,099 or INR 1,499 upfront for the bundled offerings. 

In addition, it is widely believed that Indians prefer smaller subscription ticket sizes payable over longer periods, allowing them to cancel services anytime. Paying upfront for the entire 84-day period may not be feasible for a big chunk of users. 

“The viability of these plans for a majority of Indians is a challenging consideration, given India’s diverse preferences and consumption habits. Price sensitivity plays an important role, as what’s expensive for some might be affordable for others,” said OTTplay’s Mudaliar.

“Indian consumers who avidly consume content and are willing to spend for quality viewing experiences might find these plans reasonable. However, it’s crucial to remember that the Indian market is scattered, and this might appeal to a narrower segment of users willing to invest more in premium content and integrated services,” he added. 

Despite these hiccups, India continued to be a key growth market for Netflix, as the country emerged as the fastest-growing market for the streaming company, with the highest net paid additions in 2022.

Overall, the OTT streaming space still appears to have a huge room to grow. With internet and smartphone penetration on the rise, more and more Indians are experiencing the streaming space for the first time. At a time when competitors such as Disney+ Hotstar are facing a tough battle in India, Netflix’s latest move seems to be a signal that it is all geared up to grab a bigger pie of the Indian OTT streaming space, which is projected to grow to a market size of $12.5 Bn by 2030.