Reference no: EM132119766
1. Can you relate this case to the concept of Competitive Advantage Strategy and Competitive Rivalry Model?
Netflix, Amaazon Take Divergent Paths to Reach Indian Audience; Netflix is relying on its global programming, while Amazon is betting on going local with its video streaming service
Abstract
Netflix is under greater scrutiny as a stand-alone streaming business, with 87 million subscribers, while Amazon's video operations are part of the e-commerce giant's much larger business, with 60 million Prime members world-wide, according to Morgan Stanley estimates. Mr. Hastings said Netflix is aiming for India's "iPhone owners," the "Western-oriented elites" who can afford Netflix's starting price of 500 rupees, near $8 a month--steeper than Indian cable TV rates of $3.30 on average, according to Media Partners Asia.
Full Text
As Amazon.com Inc. and Netflix Inc. look to build up in India amid a global expansion, they are following two diverging scripts.
On trips to Mumbai this year, Amazon Studios chief Roy Price sipped tea with Indian actor Amitabh Bachchan, visited the mansion of the country's heartthrob Shah Rukh Khan and watched "Bollywood" musical numbers on set, as he scouted for locally appealing programming for Amazon's forthcoming video service.
Though Netflix made its debut in India nearly 10 months ago, its executives have been decidedly less visible. That is because Netflix makes content-buying decisions out of Los Angeles even for regional shows, toensure they have global appeal. The deal for its new Indian original series, based on the internationally acclaimed Mumbai crime novel "Sacred Games," was sealed out of Los Angeles with Indian producer Phantom Films.
The contrasting approaches in India highlight fundamental differences in how the streaming giants are pursuing international growth as the U.S. market gradually matures.
Netflix, which has expanded into some 190 countries following a near-global launch in January, doesn't believe in a physical presence in every market. It says it can use its trove of viewer data to buy programming with multinational appeal, so that it doesn't have to spend heavily on local content in every single country.
"There's no point in us trying to out-Bollywood Bollywood at this point," said Netflix Chief Executive Reed Hastings.
Amazon has been choosier internationally, pushing Prime Video into some European markets, Japan, and now India. Mr. Price's bet is that homegrown programming will win over Indian audiences, a strategy analysts say could also help increase shoppers' loyalty to Amazon's e-commerce site. "You can have a global service, but there are no global customers," Mr. Price said. "There are only local customers." In Indian entertainment, for instance, "the musical aspect is super important, so you want to embrace that," he said.
Investors are closely following the duo's international plans. Netflix is under greater scrutiny as a stand-alone streaming business, with 87 million subscribers, while Amazon's video operations are part of the e-commerce giant's much larger business, with 60 million Prime members world-wide, according to Morgan Stanley estimates.
After its international subscriber growth disappointed investors in the June quarter, Netflix beat expectations in the latest quarter, leading to a 20% stock jump.
India is an important market, given the regulatory barriers that make streaming in China tough. Though a low percentage of India's 1.3 billion people have internet access, it has 18 million broadband homes and 149 million mobile broadband subscribers. But there are hurdles, including rampant piracy and relatively low use of credit cards. India's streaming market also is crowded, with numerous services from TV networks such as Hotstar, operated by 21st Century Fox's Star, and studio-borne services like Balaji Telefilms' ALT Balaji.
Mr. Hastings said Netflix is aiming for India's "iPhone owners," the "Western-oriented elites" who can afford Netflix's starting price of 500 rupees, near $8 a month--steeper than Indian cable TV rates of $3.30 on average, according to Media Partners Asia. In contrast, Amazon is targeting the mass market, charging about $15 a year for its Prime free-shipping membership and streaming video.
Amazon has built up a local Indian video team over two years even though its service will only launch in the coming weeks. Mr. Price visited Indian movie moguls in part because the stars own a cache of rights to their film libraries and have outsize say in future business relationships.
"You really get a sense, being there, of how big it is, and how lively and exciting," Mr. Price said.
The e-commerce giant, currently, is seeking roughly a dozen Indian original shows, aiming to release one a month, a person familiar with the matter said. One new animated series "Baahubali: The Lost Legends," based on a blockbuster South Indian movie with Hindu mythical flavor, will be produced by Graphic India in Hindi and English, and regional languages Tamil and Telugu.
Another forthcoming drama with Bollywood heavy-hitter Farhan Akhtar, "Power Play," is about a cricket team owner. Amazon also paid about $10,000 to potentially bid on rights for the popular Indian Premier League cricket games, Indian officials confirmed.
While Amazon wouldn't mind a multinational hit, it is happy buying content just for India. Selections like "Baahubali" show a "deep focus on going hyperlocal" and a "strong 'India-first' approach," says Sharad Devarajan, chief executive of Graphic India.
Netflix has vast aims for every show. "Brahman Naman," a movie Netflix bought at Sundance Film Festival, follows nerdy Indian friends taking a road trip to lose their virginity, a familiar coming-of-age Hollywood narrative.
It also tapped Vir Das, a popular Indian comedian to do a "multicountry Comedy Special," Mr. Das said.
Mr. Hastings said Netflix won't say "never" on cheaper pricing but would rather beef up its library. Netflix in India is for the country's elites at present, he acknowledges, but "in the next couple years we will want to grow beyond that."