If there's a market where Netflix is concerned about plan pricing as Disney begins its big push into the video streaming market, it's not the U.S. It's India.
Netflix has raised its prices on plans in the U.S. and recently announced intentions to do the same in Brazil, Mexico and some countries in Europe, but it is struggling to lower its price tier in India as it looks to add more subscribers in a country that has more than 460 million internet users.
The struggle to get the Indian market right is not a new issue for Netflix, but it is one the company's management team openly addressed on its Tuesday earnings call.
"We're quite certain that we should do something to find a price tier that's lower than the existing lowest price tier to broaden that accessibility," said Netflix's Chief Product Officer Greg Peters on the company's Q1 earnings call. "We think that they'll be important to adding members in India."
Netflix is still one of the most expensive video streaming options in India. According to a recent Reuters report, the three Netflix monthly plans in India range from 500 rupees ($7.20) to 800 rupees ($11.50), significantly above the price points of Amazon Prime Video's plan ($14 a year) and roughly twice as much as Hotstar, the country's largest video streaming service, owned by Disney.
The Netflix Indian subscriber based has estimated by industry sources at 1 million, though the company has said it is aiming for 100 million subscribers in India.
In March, Netflix began offering a mobile-only test plan at roughly $3.60, based on current exchange rates. During the earnings call, Peters acknowledged that the plan is something the company is trying out, but isn't "positive that's the right model."
Now upcoming streaming services could threaten to take a larger share of the market, like Disney and Apple. Netflix officials said on the earnings call that the increasing competition in the U.S. isn't something the company can worry about too much.
Among the comments from Netflix CEO Reed Hastings on the earnings call:
Last year Netflix Chief Content Officer Ted Sarandos told CNBC that Asia's young and increasingly digital population presents an "incredible opportunity" to ramp up the company's international subscribers. The company hopes to add 100 million subscribers in India alone, which has proved its desire for video streaming by turning en masse to YouTube and other similar video services, Sarandos said.
A report by global management consulting firm Boston Consulting Group predicted the over-the-top, or OTT, market in India will grow to $5 billion in 2023, although last year it was estimated to be $500 million. Kanchan Samtani, a partner and managing director at BCG, noted the country has a price sensitive market and it's challenging to break through the clutter.
Netflix has continued to push original content in India, and Sarandos said it was "super encouraged," with Netflix India originals like "Sacred Games," "Delhi Crime" and "Love Per Square Foot," which have gained a lot of viewers in the country. On Monday, the company announced it would be adding 10 more original films to its roster that will be produced by Indian companies, and plans to release 15 total by the end of 2020.
International markets have spearheaded Netflix's growth as it begins to slow down in domestic markets. The company beat estimates by adding 7.86 million international paid subscriber additions compared to the 1.74 million domestic additions. It has focused on localizing its content and moving away from dubbing.
The company has continued to spend on original content and has investors concerned over its free cash flow. The company reported a negative $380 million net cash flow, $93 million more than the same period last year, and the company expects its 2019 free cash flow deficit to be greater than the negative $3 billion previously expected.
"As we sort of have that ongoing content investment and we're really providing stories that Indian consumers really love, it's an opportunity for us to look at how we broaden the accessibility of the service then to more and more Indian consumers," Peters said.
Shares of Netflix fell about 1% after reporting its first-quarter earnings after the bell Tuesday and teetered between positive and negative territory Wednesday morning. The company's Q1 revenue, earnings and subscriber numbers beat Wall Street expectations.