AMZN Amazon.com Inc

By Newley Purnell 

NEW DELHI--To win in India, home to many of the world's next billion internet users, Netflix Inc. and Amazon.com Inc. are copying the tactics of a video-streaming service built for the local market.

Hotstar dominates the Indian market. Launched four years ago by media conglomerate Star India as a mobile-first streaming platform for watching cricket, movies and TV, it now has 300 million monthly users--roughly 10% more than YouTube, India's second-biggest video content platform. While only three million users pay for access, that is still more than Amazon has, and more than twice as many as Netflix. Walt Disney Co. now owns Hotstar.

Netflix and Amazon, shut out of China and facing stiff competition in the maturing U.S. market, are adopting the strategies that fueled Hotstar's success--low prices that the average Indian viewer can afford and loads of local content in multiple Indian languages.

Netflix is churning out Indian-language dramas, love stories and thrillers and slashing its monthly rates. Amazon has signed up local stand-up comedians and backed a "Sex and the City" clone about a group of women in Mumbai that is broadcast in three Indian languages.

India's plummeting mobile-data prices and cheap smartphones have triggered an internet-access revolution in the world's second-most-populous country. Global streaming services, local broadcasters and telecommunications companies are trying to capitalize with competing offerings to win new users, in a market where subscription and ad revenue are expected to skyrocket to $5 billion in 2023 from $500 million last year, according to BCG, a consultancy.

Streaming players are after consumers like Ashish Dubey. The 35-year-old driver watches Hotstar while waiting for his boss at his New Delhi office. He has heard of Netflix and Amazon but isn't interested in their programs. "I subscribed mainly for cricket," he says.

Hotstar says its global rivals can't match its library of decades of popular shows, which it inherited as a subsidiary of Star India. Disney acquired Star India, a 28-year-old network of more than 10 Indian television channels, as part of its $71.3 billion deal in March to buy the bulk of the 21st Century Fox entertainment assets.

"We have a two-decade head start," says Varun Narang, Hotstar's chief product officer. About 80% of content on the platform is free; the rest costs as little as $1.19 a month for everything.

When Amazon and Netflix landed in India, they each brought global libraries of hundreds of shows and movies, but only a small portion was in local languages. They had little popular content from India.

Netflix executives initially targeted well-to-do, English-speaking urban Indians, according to a person familiar with the matter, and quickly figured out they had to slash prices to reach beyond India's upper crust, the person said. Netflix costs around $7 a month in India, but to juice growth the company has introduced smartphone-only plans that cost less than $1 for one week of access at a time.

"We're trying to broaden the accessibly of Netflix," with lower prices and local-language options, said Bela Bajaria, vice president of international originals. Netflix has six original series and 13 original films from India in the pipeline, in addition to productions such as "Lust Stories," a new Indian original movie about sex and relationships. The Mumbai office now has about 70 people, up from a handful just a few years ago.

Asked last year at a business conference where Netflix will get new subscribers in the years ahead, Chief Executive Reed Hastings said: "The next 100 million is from India." Currently, of Netflix's nearly 149 million global users, only about 1.2 million are in India, according to research firm IHS Markit.

Amazon has about 2.5 million subscribers in India, IHS Markit says. Prime Video, which launched in India in 2016, costs as little as $1.19 a month. As in other markets, subscribers also get Amazon music streaming and expedited shipping. Amazon is aiming to release eight Indian original shows this year, up from one 2017 and five in 2018. Last year, Amazon added an interface for its app and website in Hindi, Telugu and Tamil, and now has content in nine local languages. Jennifer Salke, head of Amazon Studios, visited Mumbai last year to meet with local staff, directors and writers.

"We are going for extreme localization," said Gaurav Gandhi, Amazon Prime Video's India director. In March, Amazon launched "Made in Heaven, " a slick drama about wedding planners that the company says has been "successful."

Hotstar, in contrast, has eschewed big-budget productions. It has rights to popular television shows in eight Indian languages from Star India, ranging from romances and supernatural thrillers to family-friendly dramas and sports. About three million people pay for Hotstar's premium service, according to IHS Markit. It costs $4.29 for one month at a time, or $1.19 a month if they buy a yearly plan and pay up front.

Cricket is a major offering. Star India had exclusive digital rights to popular Indian Premier League cricket when it launched Hotstar and expanded that in 2017 to global TV and digital rights in a deal valued at $2.3 billion.

The pressure on Netflix and Amazon is likely to increase when Disney launches its Disney+ streaming service in November and rolls it out internationally over the next two years. Still, there is room for everyone, because only 3% of India's 4G-enabled smartphone users subscribe to video services, said Constantinos Papavassilopoulos, an analyst who follows India streaming trends at IHS Markit.

Vibhuti Agarwal contributed to this article.

Write to Newley Purnell at newley.purnell@wsj.com

(END) Dow Jones Newswires

June 04, 2019 07:14 ET (11:14 GMT)

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