Business Research Methods

Report

on

Research on Netflix Business Model

Under the Guidance of

Prof. Ram Mohan Dhara

GROUP 1

Aditi Tripathy (200103012)

Anmol Mishra (200103032)

Abhishek Biswal (200103008)

Sreekanth S G Nair (200101151)

Owais Afzal (200103104)

Rahul Selvakumar (200103119)

  Acknowledgement

This project was done in third term in 2021 under the guidance of Professor Ram Mohan Dhara.
We sincerely express our appreciation and gratitude to those people who helped us to complete
this study. In particular, we thank Prof. Ram Mohan Dhara, whose advice and suggestions
contributed to the accomplishment of the project's success. By her encouragement, our team
members were able to carry out the research. Additionally, we'd like to thank our family and
friends who supported us in our endeavor.

Lastly, thank our respondents for their cooperation, which went a long way toward completing
the research. Without their help, the findings & analyses, the work would be unfinished. We do
express our appreciation for their contribution.

 Table of contents
 Executive Summary

As Netflix, the popular California based video streaming platform completes 5 years in the
diverse Indian market, challenges are abundant. The world’s leading provider of subscribed
video streaming platform made the announcement of rolling out operations in over 130 countries
around the world. Under that strategy, they started their services in India on January 6th 2016.
With rising disposable incomes and swiftly changing media consumption pattern of millennial
and urban audience, India presented a lucrative opportunity for Netflix. While India was a key
market for them, it was very a different market from the company’s usual stronghold, the US,
and posed several strategical challenges. While Netflix has grown significantly in India, and the
OTT video streaming market is seen to grow at an annual rate of 35%, the problem at hand
remains to strategize the future growth path.

 Introduction
o Problem Background

Netflix, Inc. is an American company, their primary business is the subscription-based streaming
OTT service. It offers online streaming of a huge collection of movies, television series and its in
house production content. In India, It has been a rising struggle to lure customer to pay a
premium subscription price for the content as the consumer are used to free content. Several
infrastructural problems in India like data caps by Indian broadband providers, poor network
connectivity and less penetration of smart equipment results in the major roadblock to middle-
class Indian market. Another major obstacle in India for OTT services is the complex nature of
the country’s linguistic landscape. As Netflix India has limited regional streaming content
available, this leads to a big challenge in capturing the non-metro viewers.

India accounts for around 5 million subscribers according to media experts and research surveys,
but it also houses big challenges. Moreover, owing to the pandemic, it is a new challenge for
Netflix to go back to production due to the current infection trends globally.

o Terms and Jargons

Term Description
OTT Over-The-Top refers to content providers that
distribute streaming media online as a
standalone product directly over the Internet,
while bypassing the traditional channels of
distribution of such video content e.g.
telecommunications, broadcast television.
DTH The DTH technology enables a broadcasting
company to directly beam the signal to your
TV set through a receiver that is installed in
the house. There is no need for a separate
cable connection. Examples of DTH
platforms operating in India are Airtel Digital,
TATA Sky etc.
VoD Video on Demand refers to streaming of
content over the Internet or through
applications typically referred to as OTT
platforms. VoD services are classified based
on the model of revenue, namely subscription
VoD (SVoD), transaction VoD (TVoD) and
 advertising VoD (AVoD). Amazon Prime
Video and Netflix would fall under the SVoD
category, whereas iTunes has a transaction-
based business model.
One of the most preferred categories of
content consumption in India is via the
advertising-based model—that is, AVoD—
which is led by YouTube
TRAI The Telecom Regulatory Authority of India is
a statutory body set up by the Government of
India. It is the regulator of the
telecommunications sector in India.
 Literature Review
o Company Overview

Netflix, Inc. is an American media-services provider headquartered in Los Gatos, California. It is

founded by Reed Hastings and Marc Randolph in 1997. The company's primary business is the
subscription-based streaming OTT service. It offers online streaming of a huge collection of
movies, television series and its in house production content as well. Netflix has around 137
million total subscribers worldwide. It is available all around the globe only except in a few
countries. Netflix started their business with DVD sales and rental by mail. They later entered
into streaming media while retaining the DVD and Blu-ray rental service.

Netflix entered the content-production industry in 2012. Since then it has greatly expanded the
production and distribution of both film and television series and also offers a variety of "Netflix
Original” content via its online library. The Company has three operating segments- Domestic
streaming, International streaming and Domestic DVD. The Domestic and International
streaming segments generate its revenues from the monthly subscription services that they offer.
It includes only the online streaming content of Netflix. The Domestic DVD segment on the
other hand generates its revenues from the monthly subscription services of only delivering DVD
by mail. Content from Netflix can be streamed from a large number of devices. Some of the most
popular ones are the Microsoft Xbox 360, Nintendo Wii and Sony PS3 consoles, Blu-ray disc
players, internet-connected TVs, home theatre systems, digital video recorders and internet video
players, Apple iPhone, iPad and iPod touch, Apple TV and Google TV. In total there are around
more than 800 devices through which Netflix is available.

In January 2016, Netflix Inc’s co-founder and chief executive, Reed Hastings, announced that
Netflix would be available across 130 countries in Asia, West Asia and Europe which includes
India. This was part of Netflix’s expansion strategy to enter international markets and launch
streaming services in more than 200 countries by 2017. The company streams movies, TV
shows, documentaries, and original productions to its subscribers in more than 190 countries.
Netflix produces its own programmes and also collaborates with movie and TV production
studios, independent producers, and others for the rights to distribute their content. To keep its
viewers engaged, it uses algorithms to predict their preferences and make suitable
recommendations for their watch list.

o Netflix in India

In India, Netflix was launched in January 2016 and has created a niche for the English-speaking
audience in the country for high-quality TV series and Hollywood movie content. But is far
behind other OTT players in terms of subscribers. According to the Counterpoint Technology
Market Research report, it was the fifth-biggest player in India, behind players like Hotstar, Voot
and Amazon.

After having spent two years in India, however, things weren’t looking as good for the company
as they were in the US. On average, India’s consumer was spending around $32 (near Rs2200)
per year on entertainment, while people in the US spent about $2260 annually, according to a
report by PWC.

Netflix has made significant progress when it comes to adding regional content, but it still has a
lot to cover. Until 2018, it had concentrated on bringing its global content to Indian viewers like
Orange Is the New Black, House of Cards, Master of None, Stranger Things, Narcos and
Daredevil.

But how has Netflix aimed to break the ice? The answer- local content. Which is why, instead of
price, Hastings says that Netflix needs to be sensitive too, and willing to invest in great local
stories and content. Therefore, the plan is to build up local content that includes regional stories.
 o Market share

Up until last year, Amazon Prime and Netflix were still playing catch-up in the Indian market.
Now, the coronavirus pandemic seems to have accelerated the often-seen scenario of
international players pushing out local pioneers. According to JustWatch, Netflix and Amazon
Prime captured a fifth of the market each in Q2 of 2020, while the cooperation of Disney+ and
local player Hotstar reached 17 percent. As recently as 2019, Hotstar alone still had a market
share of almost 30 percent while Amazon Prime and Netflix captured only 10 and 5 percent of
the Indian market, respectively.

The Indian small screen has also been attracting attention during the COVID-19 pandemic as a
place where new Bollywood productions have been released – either as original material or as a
last resort while cinemas remain shuttered. According to the BBC, Netflix has released 18
Indian-made originals this year, while Amazon Prime is looking at bringing out 14 in 2020.
Disney+ Hotstar, in a different approach, has said it would host seven movies that were
originally headed for the big screen.

Despite the newfound dominance of international players, the Indian streaming market remains
fragmented, with a slew of local brands still taking up nearly half of the market.

The new Disney+ Hotstar service stands out as a brand which combines Disney’s global
streaming endeavor with Hotstar’s Indian programming and cricket league broadcasting rights.
Hotstar’s parent company, Star India, has actually been owned by Disney since 2019, when
Disney purchased 21st Century Fox. Hotstar streaming was launched in India in 2015, around a
year before Netflix and Amazon Prime dropped their services.
 o Current Business model

Netflix is one of the current pioneers of subscription-based content. It runs on a Subscription

Video on Demand (SVOD) model. Subscribers pay for a monthly plan and are given access to a
vast library of media—any time, anywhere. Thus, subscriptions are Netflix’s main source of
revenue.

But unlike apps like Spotify which also runs on premium subscription, there’s no free option in
Netflix. This means all members are paying for the content they want to watch. Users enjoy the
convenience of ad-free entertainment, although ad trials have taken place recently.

Netflix offers different prices based on the quality of video required- Basic, Standard and
Premium. Generally, it provides the first month of subscription for free. Basic with standard
resolution is $7.99 a month, but it can only be used one device at a time. On the other hand, for
$10.99 a month, one gets HD video on two devices, and shelling out $13.99 a month offers Ultra
HD streaming on four devices.
As Netflix opened up to around 190 countries all over the globe, the cost varies depending on the
country as well. You can get a Basic subscription for as low as $5 in Mexico or as high as $11 in
Switzerland and Denmark.

o Video Streaming market in India

Boston Consulting Group (BCG) in one of its reports published that India’s OTT (overthe-top)
video and online content streaming market is currently of $500 million, has been growing nearly
four times in the last six years from nine players in 2012 to 32 players in 2018 and is set to touch
$5 billion by 2023. This ‘hyper-competitive’ market has attracted global as well as local players
driven by rising deep-pocketed customers, increased data penetration in rural India and increased
adoption across various age groups including women as well as older generations. 82% of the
users currently in India are engaged on advertisement based Video-onDemand (AVoD)
platforms, whereas, 18% pay for content on Subscription led (SVoD) services. 40 to 50 million
users would be paying for SVoD content by 2023, whereas, 600 million would be paying for
AVoD platforms. Among these 650 million or 48% of the users would be from rural India. Three
types of consumers:

 Traditionalists: primarily consume content on media other than OTT platforms, heavy
television watchers, equally distributed across metros, tier-one and tier-two cities.
  OTT Experimenters: significant consumption on both conventional and OTT platforms
but are heavy watchers of AVoD content, 60% of these are present in the metros.
 Early adopters: more urban, more equally distributed

 OTT vs TV

Following TRAI’s rule for DTH providers and cable operators, which came into effect on
February 1 2019, subscribers have the option to pay only for channels they want to watch. But
that many not necessarily translate into cheaper cable bills. A report by CRISIL shows that
monthly TV bill for users who opt for the top 10 channels in addition to free-to-air channels will
go up by 25 per cent.

Thanks to streaming services, some of which charge as low as Rs 999 per year for premium
subscription, users can enjoy most channels at a lower monthly cost. For instance, Hotstar gives
access to Star network channels like ‘Life Ok’, ‘Star Plus’, etc as well as HBO. SonyLIV for
Sony TV channels and Voot, which is a free service with content from across channels like
Colors, MTV, etc. Zee5 is another such option.

The Direct-To-Home (DTH) television subscriber base has dipped by more than 20 lakh over 2019.

The findings from Indian Telecom Services Performance Indicator Report October – December
2019 published by the Telecom Regulatory Authority of India (TRAI) state that the segment
ended the year with approximately 6.99 crore as compared to 7.24 crore in March the same year.

The DTH market in India is dominated by Tata Sky (31.80%), followed by Dish TV (30.55%),
Airtel (23.31%) and Sun Direct (14.35%).

 Business Research Objectives

With rising trend in the OTT platforms in India, we are trying to identify how Netflix is doing
in terms of content, subscribes and pricing and changes it can bring to improve its business
model.

Hence, the research objectives of our study were

  To identify the preferences of the audience among various parameter (TV vs DTH)
 To identify the average usage of OTT platforms(Netflix) by consumers
 To identify the content consumed by a typical " Indian" Consumer
 To determine how pricing affects viewership and number of subscribers
 To identify the parameters in which Netflix is doing better or worse than its competitors
 To identify the average usage of Netflix by a consumer

 Key information areas

To analyze the consumption behavior people, we need to understand how the entertainment
industry has evolved over the years. Access to the internet and people’s lifestyles have
contributed to video consumption going digital. Through this analysis, we aim to probe deeper
into the following questions:

 Preferences between Cable TV and OTT platforms

 Pattern of content consumption – types, viewership
 Changes in consumption behavior regarding OTT platforms
 Choice of platforms for OTT consumption

 Research Methodology
 Data Analysis
Survey 2

Quantitative Survey – Methodology

The survey was conducted to quantitatively measure the OTT consumption of the audience and
to get insights regarding the factors affecting the same.

The survey was mainly aimed at the teenage population who is considered as the prime
consumer of OTT content. The survey included questions pertaining to comparison of OTT
platform in general with the TV platform and questions pertaining to Netflix in comparison with
other OTT platforms. The questions were framed using the ____ approach.
Analysis was performed on the 44 survey inputs and the quantitative validation of the same was
conducted to get research insights.

Recommendations:

Based on the survey analysis, we can infer that ott

1)Netflix has to reduce its price. It can be done through by having an option of customazibe
content package based on the content they wish to view and price accordingly (Similar as DTH
model)

2)Netflix can start including more regional content and can also look at releasing the latest
original moviesn which hit the theatre screenns ( Similar to Amazon Prime)

3) Netflix can come up with a loyalty program or reward metrics?????

4)