Netflix is considering experimenting with cheaper pricing tiers that sit below its “current lowest tier” in order to expand further into new markets, such as India, the company’s Chief Product Officer, Gregory Peters, said during an earnings call:
“We’ll experiment with other pricing models, not only for India, but around the world that allow us to sort of broaden access by providing a pricing tier that sits below our current lowest tier and we'll see how that does in terms of being able to accelerate our growth and get more access.”
This move would clearly be motivated by the goal of increasing growth; the company is betting on India to bring in its next 100 million subscribers for its long-term goal, and the current pricing doesn’t really make its service stand against local competitors.
Netflix’s subscription starts with its Basic tier at ₹500/mo ($6.80) in India, while Amazon’s Prime subscription is available at ₹129/mo ($1.75) or ₹999/year ($13.56). Hotstar, a local streaming service now owned by Disney, is available for ₹199/mo ($2.70).
Netflix CEO Reed Hastings isn’t shy of the competition, however, and says there’s plenty of room to grow in the current global market:
“if you've got five to 10 years more growth in your current market, you're probably optimizing value to stay in your current market and strengthen. Eventually, your market may not be able to hold your growth ambition. So that happened to us in DVD. We couldn’t stay in DVD forever.
Of course, we diversified in a streaming, so we're open to those possibilities. But there is so much growth ahead that’s possible in streaming video entertainment. So we're just going to focus on that for a very long time. Unfortunately lots of other companies are also focusing on that, but that's going to make it exciting for us for the next few years, great for consumers, incredible for producers. I mean there's never been so much TV and movies being created around the world.
And so the game is on. We're super excited about pleasing consumers as much as we possibly can. And someday, many, many years from now, we may need to diversify, but for now, let’s focus on the core of those amazing title brands. And when you look at the content, we have coming out this quarter and next year, we couldn't be more excited, we couldn't be more busy.”
As for India, Hastings says that the company “will take it one million at a time and figure out how to expand”:
“We’ll go from expanding beyond English into Hindi and then into many more languages, more pricing options, more bundling, all of those things are possible. There's over 300 million mobile phone subscriptions or households, that’s almost twice that in mobile phone subscription. So there's a huge market and people in India like around the world love watching television.”
Netflix's strategy appears to be clear, but as of yet, it's only been about experiments. It was in October of 2015 when the company raised its prices by $1; two years later, in October of 2017, the company once again made the same move. It's October of 2018 now, and with ongoing experimentation with its pricing, it's clear that the company is contemplating making a few changes once again. If not this year, then perhaps the next.
That's especially important to note as these changes may not just be about a reduction in pricing to make the service more accessible. In July earlier this year, the company was caught testing out an "Ultra" pricing tier in some of its established markets, which was more expensive than its current Premium tier.
It will be interesting to see where Netflix takes things from here, especially with the upcoming competition, but it's clear that there are some changes brewing for the company.