The discussions that took place during Netflix's Q4 earnings report reveal the inner thoughts of Netflix's executive team on the platform's international expansion via localization. Despite significant international growth in 2021, India has become a sticking point for the streaming giant. Let's break down why Netflix's (usually) bulletproof localization strategy isn't working in India.

Netflix's 2021 localization story, as told by its executive team

According to the earnings call, Netflix subtitled seven million and dubbed five million run-time minutes in 2021.

“At that scale, we’re learning how to make localization more compelling to our members,” said Greg Peters, COO and Chief Product Officer. He highlighted that they're now so sophisticated in their approach to localization that they even consider the presentation of content for maximum emotional appeal to different nationalities.

Of course, the most famous Netflix series of 2021, Squid Game, is a resounding localization success story, adding a reported $900 million to the company's value and breaking all of its viewership records. But they were quick to highlight that getting to this stage was not straightforward.

Squid Game Netflix poster showing the central characters
Source: The Economic Times

“In many of those places where we built [a localization delivery system] out, there was zero infrastructure for subtitling and dubbing,” said Ted Sarandos, Co-CEO of Netflix. And while some local markets were easier to crack than others, there “wasn’t an easy one in the bunch.”

For example, while Netflix saw 100% growth in Korea in 2021 over 2020, India has been a very different story.

“In every single other major market, we’ve got the flywheel spinning. The thing that frustrates us is why haven’t we been as successful in India,” explains Reed Hastings, Co-founder, Chairman, President, and Co-CEO at Netflix.

Let's look at a few factors holding Netflix back.

Netflix's Indian roadblocks explained

Netflix has been established in India for six years, and is reported to have around 5 million subscribers in the country. By contrast, its competitors Hotstar (Disney+) and Amazon Prime have 46 million and 22 million subscribers respectively.

There are three major reasons why Netflix is trailing behind its competitors more in this region than others it targets:

1. Price sensitivity

While relatively affordable and in line with competitors in other geographical regions, Netflix has much cheaper competition in India.

Co-CEO Hastings makes this point by referring to cable television:

“What’s unique about India is cable. It is about $3 per month, per household. So radically different pricing than the rest of the world, which does impact consumer expectations.”

Despite increasing subscription fees recently in the US, Netflix has cut its fees in India by up to 60% to try and be more competitive. The cheapest monthly plan now costs just 149 rupees ($2), but shaking off its reputation may take some time.

Shubhra Gupta, a film critic and columnist for The Indian Express newspaper, says:

"Netflix is still perceived as an upmarket, expensive service. It is still seen as foreign."

Changing this perception will take more than just reducing cost, the perceived value of Netflix's content needs to increase for Indian consumers.

2. Content strategy

Analysts have been critical of Netflix's content strategy for years, stating that the service relies too heavily on its international original content rather than local original content or blockbusters.

According to media consulting firm Ormax, Netflix only had one series in the top 15 most-watched Hindi-language streaming shows last year.

As a comparison, its competitors have seen success by tackling key content types for the region.

Disney+ has invested heavily in domestic sports programming. It now owns many of the digital broadcast rights for cricket in the country, which attracts extremely high viewership.

Amazon Prime has opted for a blockbuster approach and owns the rights to about 40% of all blockbuster films available in Indian languages (BBC News). Not to mention all of the other benefits that come with a subscription, including online shopping perks and access to eight other smaller streaming services.

Amazon Prime's eight bonus channels
Source: Digital TV Europe

Mihir Shah, Vice President of Media Partners Asia, said:

"Netflix needs to go more local and deeper on its regional content offering while also assuring a steady cadence of fresh content."

3. Language coverage

While Hindi, the third most-spoken language in the world after English and Mandarin, is spoken In India, the country is home to over 100 languages, 22 of which are considered official languages of the country.

This makes localization considerably more difficult and expensive than for countries like Germany or Japan. To effectively target the region, you would need to localize each series into multiple languages.

As a result, Netflix has been criticized for focusing too much on Hindi content proportionally. This is in stark contrast with Amazon Prime, which offers a wide range of programming in 10 Indian languages.

For example, according to Business Standard, Netflix purchased the rights to 20% of the top 100 films in Hindi based on domestic box office since 2018, but only 9% of films in Telugu. Meanwhile, Amazon Prime bought 48% of films in Hindi and a similar 40% of films in Telugu.

Until Netflix can compete with the scale of the language options of its competitors, it limits its own pool of potential customers in this linguistically diverse country.

Why Netflix isn't worried about its future in India

While the earnings call revealed frustration with the lack of progress in India, Netflix is still confident it will see significant growth in the region. As COO Peters concluded:

“I think we’re quite bullish that India isn’t fundamentally different in some way that we can’t figure out how to tailor our service offering to be attractive to Indian consumers who love entertainment. We know that for sure. And so that, I think, gives us a lot of optimism just to continue to work away at it.”

The executives cited their history in Brazil as an example. They had a “brutal” first couple of years where it took time to get the product market fit and the right content in place, but now Brazil and the rest of South America has given Netflix “a long runway for growth”.

A chart showing Netflix's annual revenue increasing from 1.64 billion dollars to 3.17 billion dollars between 2017 and 2020
Source: Statista

While there are many miles between Netflix and its competitors in India, Netflix's track record of localization triumphs can't be ignored, and we can't count the streaming giant out just yet.

To learn more about how Netflix builds its localization strategies, check out this article.