On Wednesday, entertainment over-the-top (OTT) player Netflix declared that it has reduced subscription rates in 116 countries, following the success of its business model in India. The company launched a low-priced subscription plan in India in 2021, and it has witnessed a 30% growth in customer engagement and 24% revenue growth year-on-year in India since then. The company decreased subscription prices for the first time by 20-60% to suit the Indian market and expand its penetration.
In its earnings report for the March 2023 quarter, Netflix stated, “These reductions — combined with an improved slate — helped grow engagement in India by nearly 30% year-on-year while F/X (forex) neutral revenue growth in 2022 accelerated to 24% (versus 19% in 2021). Learning from this success, we reduced prices in an additional 116 countries in Q1.” The countries where Netflix has lowered the price contributed less than 5% to its total revenue during the financial year 2022.
“We believe that increasing adoption in these markets will help to maximize our revenue in the longer term,” the company said. Netflix’s global net income fell by roughly 18% to USD 1,305 million in the quarter ended March 2023 from USD 1,597 million in the same period a year ago. However, the revenue of Netflix increased by 3.7% to USD 8,162 million during the reported quarter from USD 7,868 million in the March 2022 quarter. Netflix’s paid membership globally grew 4.9% on a year-on-year basis to 232.5 million.
Netflix anticipates its net income to decline by about 1.6% to USD 1,283 million in the April-June 2023 quarter, while revenue is expected to rise by 3.4% to USD 8,242 million. The company, which had previously been against advertisements on its platform, has now introduced advertisement-based plans with lower subscription price points than its initial plans.
“Engagement on our ads tier is above our initial expectations, and as expected, we’ve seen very little switching from our standard and premium plans,” Netflix stated. The company believes that its new advertising-based subscription plans will provide greater options for its customers, which will eventually lead to increased engagement and revenue growth.
In conclusion, Netflix’s decision to reduce subscription prices in 116 countries comes after the company’s success in India. It is an effort to expand its reach and boost revenue growth in the long run. The company is also experimenting with advertisement-based plans to cater to customers who want lower-priced subscription options. Despite a decline in net income, the company’s revenue has grown, and it anticipates continued growth in the upcoming quarter.
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