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Hot Seat

‘Doubt if Indian broadcasters who have OTT platforms will want to do content deals with Netflix’

Jonathan-Friedland2Netflix has launched in India with a basic monthly plan of Rs 500 for viewing in SD, Rs 650 for HD and Rs 800 for 4K. Many executives of OTT platforms believe the price is too steep for a price-conscious Indian market where cable TV and DTH connections are still cheap.

So, will Netflix’s entry shake up the Indian over-the-top (OTT) market, which had seen frenzied activity in the previous year?

In an interview with TelevisionPost.com’s Ashwin Pinto, Netflix chief communications officer Jonathan Friedland reveals about Netflix’s India plans.

Edited excerpts…

Q. In India, ARPUs for cable television and DTH are low. How do you see Netflix faring in this scenario?

We are not in the same business. Our business model is completely different from cable television. We don’t have advertising. We are subscription only. We are not part of the cable universe. We do not have to negotiate fees for cable carriage.

We have 75 million members globally, out of which 30 million are outside the US. We started with a bunch of new markets in January and we believe that we will have added six million new subscribers by 31 March 2016.

Q. How many subscribers will you add from India?

We have no idea! Nobody is paying yet. We will soon see if we are doing a good job and whether the feedback from users is as positive as we hope it will be. We will optimise as we go along. We will add Punjabi, Tamil movies, and other language movies. We will see what people watch and then we will add more of that.

We programme our service on the basis of what people actually watch. It could be that people here do not expect to watch big Bollywood films on Netflix. They may come to us for indie films. We do not know yet. We will find out in due course.

Q. Your shows are available on Indian channels like Zee Café. Will that continue to be the case?

The only original shows that were licensed globally outside of Netflix were our first original shows ‘House of Cards’ and ‘Orange Is the New Black.

In 2013 when we started making our own shows, we were only in the Americas and in the UK. So we couldn’t afford to buy the rights for a bunch of countries that we were not in. But for all the shows since then, we own the global rights.

They will not be licensed to anybody else. They will only be available on Netflix. For the shows licensed earlier, we have gone back in many countries and bought the rights along with local broadcaster.

‘The only original shows that were licensed globally outside of Netflix were our first original shows ‘House of Cards’ and ‘Orange Is the New Black. In 2013 when we started making our own shows, we were only in the Americas and in the UK. So we couldn’t afford to buy the rights for a bunch of countries that we were not in. But for all the shows since then, we own the global rights. They will not be licensed to anybody else. They will only be available on Netflix’’

Q. Abroad Netflix has partnerships with consumer electronics companies to stream on the Xbox 360, Blu-ray discs and TV set-top boxes. In India will you follow a similar strategy?

Yes, we are available on practically every smart TV. Samsung, Sony and LG smart TVs as well as Vu already have the Netflix app. It is on all the different game platforms.

In India we are talking to all the major telcos and broadband service providers.

Q. Will you do content deals with Indian broadcasters like Star and Zee?

No, because they have their own digital platforms. I doubt that they would want to do business with us.

Q. How much local content for India do you have now?

We have a small amount of Indian content as of now. We will scale up as we go along. You don’t want to make the mistake of getting in titles that people don’t want to watch. We just licensed our first Indian movie exclusively.

Indian movies that we license should be available to Netflix users everywhere. The first one we have done is the exclusive global rights to a film called ‘Brahman Naman’ directed by Bengali director Q. This will be on Netflix and everywhere in the world in a couple of months.

Q. When will you create local shows or films in India?

We have not set timelines. Our task is to find great storytellers and develop projects with them. We do not set ourselves a deadline for the amount of content that we need. That does not lead to good creativity. In fact, it creates bad TV. We have already shot a show here called ‘Sense8’. It was shot in many cities including Mumbai.

It took us four years of being in Mexico to do our first local show ‘Narcos’. In France we started working on ‘Marseille’ the minute we entered the country. We also launched its first Japanese original series quickly because that production was a partnership.

Q. How much of Netflix’s US content will be available in India?

Netflix’s service in the US is much bigger as we have been doing it there for 10 years. We have 45 million subscribers.

When people say that we have only seven per cent of our content in India, they are looking at the title count based on what is on the US service versus the India service. This does not make any sense.

We started in the US with a pathetic library, which was way worse than what is available in India. In every country that we go to, we start with a small content selection and build on from there.

‘We will not do content deals with Indian broadcasters like Star and Zee because they have their own digital platforms. I doubt that they would want to do business with us’

Q. Could you talk about adding local content?

Netflix in due course will add local-language films in Punjabi, Telugu, etc. We will keep tabs on what people watch and add accordingly.

Our programming service is based on what people actually watch. We don’t want to make the mistake of getting in titles that people don’t want to watch.

Q. In the US you have a deal with Adam Sandler. Would you look at doing something similar in India?

Yes if we can find someone to work with. Adam Sandler is a proven movie star. We told him that he could come and make movies with us.

Q. How did ‘House of Cards’ happen?

Director David Fincher came to us and said that he wanted to make this TV show. He said that it would cost $100 million for 26 episodes. We had one condition – that he put his name on it. We knew that David was a perfectionist and he would not allow anything to go on air that is not up to his standard. We could do something like that in India as well.

Q. Would you look at DVD rental service in India?

No! This is only present in the US. The future is the internet. The physical format is dying.

Q. What payment options are there in India?

Right now, we have limited payment options—international credit cards, iTunes and Paypal. But we will be adding to this over time. In countries like Mexico we introduced pre-paid cards three years after we started. We will work on payment options in India.

Q. Do you have an office in India?

No, we do not. We have teams of people who go out to license content, to do marketing, to do publicity, engineering, etc. They are based in California. We have a small office in Singapore. Should Netflix scale up original content in India, then we might also set up an office in the country. But I don’t know when that is going to be.

Q. Why did Netflix open in 130 countries at the same time?

After opening country by country after five years, we learnt three things. One is that we knew a lot more about what people actually wanted to consume the day after we launched than after months of research.

Secondly, we have enough original programming to actually build a basic content set that would work locally.

The third is that internationally people just can’t wait to see things. We have the opportunity to bring all of our original programming to people in India, Canada, Brazil and Germany at the same moment. Everything that premieres on Netflix will premiere globally at the same time.

Q. In terms of potential where does India fit?

India is our number one market in terms of potential. Then you have Japan and Korea.

India is an important market for us because it is huge. There seems to be pretty big enthusiasm for us. A lot of people are checking it out and a lot of people are watching it.

Q. Will you target the metros first?

We are only in English right now. We are focused primarily at this point on people who live in the big cities, who are the early adopters of technology. They have international credit cards. They are the people who have heard of our shows and usually try things first.

From our experience when we enter a new market, young men watch Netflix first. They have iPhones and have heard of our shows. But then it broadens very quickly to women, kids and gradually it goes up to grandma.

Q. What is the big challenge for Netflix as it tries to grow its presence in the country?

The challenge will be to build user engagement. The more people use and watch the service they will stay and pay. This is critical.

Unlike cable television, we can’t ever stop users from leaving. People can leave Netflix at any time by clicking a button; they can also come back if they want to. There are no contracts.

We want to build a service in India that works great with Indian consumers. There are many dimensions to that such as content, the right language assets, the right streaming capabilities, the right partnerships and the right payment options. There are many things that we are working on to make the service better for India.

Q. What is the timeframe to break even in India?

We managed to break even in three and a half years in our first group of international markets—Latin America, Scandinavia, the UK, Netherlands and Canada. But I don’t know how long it will take to break even in India.

Q. What kinds of consumption patterns are seen on Netflix globally? Is there any kind of content that resonates better?

Our original series are by far the most watched thing. Series like ‘Narcos’, ‘Daredevil’, ‘Jessica Jones’ and ‘House of Cards’ are popular. Today in the US 30 per cent of what people view is our original content. I think that in India and internationally the ratio might be weighted more towards our original content.

Q. Could you talk about how Netflix learns?

As an Internet company, we have a direct relationship with the consumers. We look at what people watch, what they like and what is their preferred payment gateway.
With Indian ISPs we have been discussing possibilities about them selling high speed broadband packages and offering Netflix to their customers for a couple of months for free.

Netflix is a learning machine. As we go along we will learn about the market and build the right product for India.

Q. How is Netflix personalised?

Everybody has a different Netflix. It looks at what you watch and then begins to show you more of that. If you have got a four-year-old in the house, s/he will spend time in the kids section and have a really great time with it. It will not be same thing that the father or mother has in their profile.

Q. What do you think of other service providers like HBO Go?

We love HBO Go. But it isn’t personalised and doesn’t have its own technology. What it does have is great, great TV shows.

We think linear channels will adapt to the internet by becoming apps. BBC iPlayer is a great example, and so are HBO Go and Amazon Prime is a great example. We believe that the different TV networks will transition to apps.

Q. Are you concerned about this competition?

I think competition is great. It gives the consumer more choice. This is not a zero sum game. Each app will have different content from the other. It will be like TV. Star will have content that we don’t have and vice versa.

Q. What is the difference between Netflix and HBO?

HBO started out with other people’s content and then created their own content. Now they have shows that nobody else has.

People watch HBO today for their shows. The same is true for Netflix. The difference is that Netflix is internet based. So we do things globally. We can bring Indian stories to Brazil. It is an amazing opportunity to globalise television without making it terrible.

Q. What is your view of Amazon’s content creation business?

They are copying us. But they care more about selling diapers and other products than creating content.

They offer content free as part of Amazon Prime, which is their free shipping service. Amazon Prime users spend more money with Amazon than other Amazon users do. Amazon original content is an incentive for people to join Amazon Prime so that they buy more stuff. I fully expect Amazon to offer their content in India soon online.

Q. You mentioned TV channels launching their own apps. Won’t that affect your content deals with those channels?

This is what has been happening in the US, which is why we started creating our own content. The channels want more content for themselves. We started out with other people’s content and now we are doing our own content. We are producing more content of our own and buying less of theirs.

Q. How has your licensing strategy evolved?

If you want to talk about the history of streaming, we started streaming nine years ago. From 2007 to 2010, we were basically takers of content.

In 2010 we went back to the channels and said that we did not want things that nobody was watching. We would pay a premium for a show like ‘Breaking Bad’, but we don’t want all those other things. They were OK about that.

From 2014 onwards, the deals were much more crafted towards what people were actually watching than everything in the kitchen sink. Come 2013 we started original programming.

Q. How much do you spend on content?

Netflix has a $5 billion content budget for this year. Out of that a pretty small percentage is spent on original content. We are growing it fast, but it is still small relative to our licensing commitments.

We will produce 75 new and returning series, movies, documentaries, kids shows this year.

Q. Do you do licensing deals for the global market on an exclusive basis?

Yes, we try not to do non-exclusive deals. The only place you can find ‘Blacklist’ online is on Netflix. The only place where viewers can watch ‘Jane the Virgin’ online, which is a CBS show, is on Netflix.

Q. You have maintained your subscription price point at $7–9. Isn’t that a challenge given that studios want more value for their content?

No! As long we continue to grow our subscriber base, we can afford more content. We have to use our money well and efficiently. Obviously the studios want more money, but we are also good negotiators. It is like a marriage.

Q. What was the need to re-organise Netflix’s content acquisition group?

We want our people to buy content for a global market. Before that, they would buy movies for a particular region. We don’t buy content for a particular market anymore. It has to be available everywhere.

We realise that not all content would travel that far. It all depends on the price.

Q. What are the plans for China and Singapore?

We are already in Singapore. We opened there the same time we opened in India. In Singapore they are getting used to OTT services. With China you have to find a local partner. I want to get India right first. If we do that, then we would have made major progress and I can happily retire (laughs).

Q. What role is Netflix playing in cord cutting in the US?

We are not pushing cord cutting. We are taking advantage of the internet to give consumers what they want to watch – a lot of great stuff at a lower price. That is not a bad thing to do. Cable bundling is a bad business; consumers hate it.

Q. You expect most TV content to be on the internet. How will this affect the traditional media business model?

A. They are going to have to figure it out just like newspapers. I think the media companies have done a better job of figuring out digital than the newspapers. It is a transition. We have chosen one model.

Q. Is there space for different business models to coexist?

A. Yes! Different business models are being seen. We have a subscription model and YouTube has ads, while Amazon Prime has a different model, which is to give it away for free to push e-commerce. Hulu in the US has ads.

Everybody will try different things. There is scope for different models to work as long as you give consumers great content and value for their money. We are totally focused on consumers as all they have to do is click a button and then they can leave. It is up to us to keep them happy enough to pay us $7–9.