After years of speculation, the Times of India is now reporting that Netflix, Inc. (NASDAQ:NFLX) will set up operations in India. Though the move won’t happen until 2016, the news has stirred TV providers and other streaming companies to brace for the storm.
India has a seemingly huge upside, especially considering the fact that the country does not have many online entertainment outlets that are legal. Even though there are easy ways around the lack of streaming options, they are not going to better than a reliable legal one.
But while no competition and a huge market seem like the perfect conditions for insertion, there are actually many roadblocks to Netflix being successful in India, and what has kept them from doing so for the last couple of years.
The biggest reason for the lack of uptake for Netflix has been costly and complicated licensing. In order for US shows to be viewed in India, there has to be a complicated process of each show selling its rights to a TV channel within India. And once that is done, the provider cannot broadcast it outside the country. It would be easier if a multinational network allowed the show to be streamed in India, but US companies have a license only to stream within the US. Netflix would have to purchase new licensing for all US shows which could not be used in any other country.
Another obstacle for Netflix is internet speed. India’s internet is developing quickly yet it is not at the level to run streaming services with ease. Further, only 20% of the population uses the internet, limiting the market and the product’s penetration. Netflix’s service will not be as fast and not many people will know about it, a problem when the goal is to make a foothold in the country.
Lastly, many business people in India remember the dominating performance of Starbucks when it was introduced into India and don’t want another corporation seizing the market so quickly. Back then, everyone knew that Starbucks was coming yet no one reacted quickly enough. Many entertainment providers are starting diversify and make sure they are ready for Netflix, which will limit the upside for Netflix.
In the end, Netflix has a blue ocean market in India that remains to be profitable. The US is already saturated with streaming companies and will have limited growth potential for Netflix. India has its fair share of obstacles, but the amount of people, the growing internet infrastructure, and Netflix’s unique platform in India are pure potential.
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