The three heavyweights are battling it out for digital dominance in an online video market estimated to reach 550 million users — roughly 67 percent larger than the entire population of the U.S. — by 2023: "Globally, India is going to be the center of this universe."
Veteran Indian actor Nawazuddin Siddiqui happened to be vacationing in Italy on the July day that Sacred Games, the critically acclaimed Netflix political thriller in which he stars, was released online around the world. The near-instantaneous response was not something that would be familiar to any Indian television and independent film star, no matter how seasoned. "I'm told it was not even a couple hours after it had launched that he first got recognized on the streets there for it," says Simran Sethi, director of creative for international originals at Netflix India.
Such unfettered global reach is something that Bollywood, for all its triumphs, has never quite achieved, and it has proven instrumental in helping Netflix rapidly align itself with the Indian entertainment industry's biggest stars since launching there in early 2016.
By March 2017, for example, Netflix's CEO Reed Hastings and chief content officer Ted Sarandos already were accepting invitations for dinner at the Mumbai mansion of actor-producer Shah Rukh Khan, also known as the "King of Bollywood." And just several months later, Khan's production company Red Chillies Entertainment announced that it would produce an original series with Netflix because the company "has shown that Indian stories have a global audience."
But as much as Bollywood is eager to team with Netflix to pave new inroads overseas, the streamer is even more desperate to partner with the powers that be in Indian entertainment.
As recently as five years ago, India was commonly viewed as a backwater of global streaming video, still a generation away from having the infrastructure and market conditions capable of supporting robust business. Today, the country is arguably the hottest and most contested front in the battle among Netflix, The Walt Disney Co. and Amazon for international streaming dominance — with the winner set to gain the upper hand in a television and digital video market projected to be worth roughly $18 billion by 2023, according to Media Partners Asia, a leading regional research group. But for Netflix's Hastings, Disney's Bob Iger and Amazon's Jeff Bezos, establishing a sustainable foothold in India means not only outmaneuvering one another, but also taking on sophisticated, deep-pocketed Bollywood itself — an entertainment sector far more mature than the home team of most emerging territories, and one comprised of industry players who have already spent decades building content pipelines to meet the needs of the country's vast and Byzantine cultural landscape. More than 20 languages are spoken in India, while audience tastes and education levels vary wildly.
For signs of the territory's growing importance to the media magnates, consider their activities there just this year. During a visit to New Delhi in February, Hastings stunned onlookers when he mused aloud that "the next 100 million [subscribers] for us is coming from India." Not long after, Sarandos made a surprise appearance at the typically below-the-radar Mumbai Film Festival to personally introduce Alfonso Cuaron's Roma to the country. The streaming giant also has aggressively leveraged its star relationships to build awareness in India, separately jetting in Brad Pitt, Will Smith and Christian Bale to promote recent Netflix releases — trips they rarely, if ever, would have been asked to make for a theatrical film, no matter how big the budget.
And when Disney unveiled its $71.3 billion deal to buy most of 21st Century Fox, analysts eyeing future growth potential were quick to label Rupert Murdoch's Star India television network, which controls 60 TV channels as well as India's leading streaming platform, Hotstar, a "crown jewel" of the acquisition.
Amazon, meanwhile, has no fewer than 30 Indian originals in different stages of production and recently developed a dedicated Hindi-language version of its platform for India. Prime Video is an integral part of Bezos' epic struggle with Walmart over the future of e-commerce in the world's second-most-populous nation — an effort for which he has already splashed out billions of dollars in investment.
"Globally, India is going to be the center of this [streaming] universe in the next five years," says Vikram Malhotra, CEO of production banner Abundantia Entertainment and former head of Viacom18 Motion Pictures, one of Bollywood's largest and most influential film studios. "In the digital video market, everything has turned in our favor."
Several factors have converged to make India "one of the most exciting places in the world" for online video, as Sarandos recently asserted while in Mumbai.
Smartphone adoption has surged thanks to an influx of low-cost handsets from China. In 2016, India's richest tycoon, Mukesh Ambani, launched telecom major Reliance Jio with a $22.5 billion investment, which helped bring mobile broadband to the masses through marketing schemes offering rock-bottom data prices. The percentage of India's 1.3 billion population connected to high-speed internet by phone surged from 24 percent in 2017 to 36 percent this year — and it is expected to climb to 58 percent by 2023, according to MPA.
India's deep history of storytelling and the fervor for Bollywood moviemaking mean that many of these millions of newly connected consumers have been converted into engaged online video users virtually overnight.
"[India's residents] are true fans of entertainment," says Netflix's Sethi. "That passion for storytelling, as much as anything else, is what made us feel that India is someplace we need to pay a lot of attention to."
India's online video audience reached 225 million in 2018, a figure that KPMG projects will double over the next five years to 550 million — a user base 67 percent larger than the entire population of the United States (where the number of online video users stands at 227.5 million).
For Disney, Netflix and Amazon, carving out market share in India at this formative moment is all the more imperative given how they have been totally iced out of the only country that is potentially larger — China.
Beijing's draconian media regulators always have prohibited U.S. television and OTT companies from establishing direct content channels in China, both for reasons of political control and to protect and nurture their own domestic operators (a strategy that has been markedly effective, with local services iQiyi, Tencent Video and Alibaba's Youku all valued in the billions).
In 2017, Netflix signed an output deal for a collection of its originals with Chinese streaming giant iQiyi, all but admitting that it had given up on ever launching its own service within the country. And Disney, despite its many successes at China's theatrical box office and theme park sector, saw its over-the-top DisneyLife service pulled down by Beijing authorities just weeks after its much ballyhooed launch via a joint venture with Jack Ma's e-commerce behemoth Alibaba — which, incidentally, has also repeatedly stymied Jeff Bezos' many attempts to secure more than a mere toehold for Amazon in the Middle Kingdom.
"Compared to China, India has a fairly level playing field; you're mostly free from intrusive government regulation," says Vivek Couto, executive director of Media Partners Asia (MPA).
"In China, for foreign entities, your only option is to license," he adds, "but in India, you can own, operate and distribute directly."
Still, local insiders insist that nothing in India is ever as straightforward as it seems, and the digital video landscape is already more cluttered and competitive than it appears. In a nation where the average daily wage is still just a few dollars, the services with the greatest reach and overall upper hand remain the advertising-supported platforms (AVOD) that are free for viewers. Google's YouTube, the first mover and global champion, is by far the most profitable video platform in India, accounting for approximately 40 percent of total online video revenue, according to estimates.
As in many developing markets, AVOD remains highly profitable not just because it's free and accessible to new users, but also because advertising spending is steeply on the rise as the country's overall economy and consumer classes rapidly expand. India's GDP grew 8.2 percent in the most recent quarter, the fastest rate of any major economy in the world. Consumption of fast-moving consumer goods (FMCG) is surging as the disposable incomes of the middle classes grow, inflating overall ad spending — a boon to both ad-supported video services and terrestrial and pay TV.
As a result, India's content industries are far less of a zero-sum game than onlookers are used to in the U.S., where Netflix's phenomenal growth is generally viewed as coming at the expense of traditional television and film.
Television household penetration in India currently stands at about 64 percent compared to the APEC average of 85 percent, and the country is still adding approximately 25 million to 30 million new television viewers each year.
"TV still has a lot of room for growth, and in the next two to five years you will see the medium offering a lot of scale, until online really starts to catch up," says Mihir Shah, vice president at MPA's India office.
Waking up to the potential of AVOD, many of India's top broadcast networks — such as Star, Zee, Sony, Sun and Viacom18 — together with a few leading movie studios, have pulled their television content (which broadcasters in India tend to fully own) from YouTube to launch video platforms of their own. Others have turned to licensing their shows to Facebook, Amazon or Netflix for a slightly higher return than YouTube offers.
The result is a feast for consumers: a proliferation of mostly free content channels, with operators trying out various models, price points and strategies in pursuit of various business goals (YouTube has taken a hit, however, with its market share of total AVOD revenue in India slipping from 65 percent in 2017 to 58 percent this year — see chart below).
A number of these new broadcaster-backed, direct-to-consumer video platforms have achieved significant scale, such as Viacom18's Voot video service and SonyLIV, which drove user growth by acquiring the exclusive digital rights to the 2018 soccer World Cup.
But by far the most successful among them is Star India's Hotstar, soon to be owned by Disney. The service boasts a vast pool of localized content from the 60-some channels Star India operates in Hindi and a plethora of regional languages, plus 20th Century Fox content and a trove of other Hollywood fare picked up through licensing deals with HBO, Universal, CBS, and others.
Since its launch in February 2015, Hotstar has grown to become the second-biggest video service in India by revenue, with a 23 percent market share, trailing only YouTube but decisively topping Netflix's 14 percent slice of the market and Amazon's 6 percent, according to MPA estimates.
It is often said that there are three religions in India: actual religious tradition, Bollywood and cricket. In September, Facebook bid $600 million for the digital rights for the Indian Premier League cricket tournament for the next five years. But Hotstar's parent company, Star India, secured the rights with a rich $2.6 billion offer for both broadcast and digital. Since Hotstar operates both a free AVOD service and a paid subscription offering (SVOD), the cricket rights have proved instrumental in helping the company lure users to both tiers. (The AVOD tier has an estimated 111 million monthly active users compared to YouTube's 245 million, while the SVOD offering has more than 1 million subscribers, according MPA's estimates.)
It's this leadership position in online video, plus the high-growth nature of Indian television (Star is estimated to command an 31 percent share of total pay TV revenue in India this year), that makes analysts especially bullish about the India components of Disney's Fox buyout.
"Disney's recognized film output plus Star's TV and OTT content should make Disney a formidable media presence in India," says Tim Nollen, senior analyst at Macquarie Bank.
But just like its rivals Netflix and Amazon, Disney will face a number of difficult dilemmas as it assumes ownership of Star India and enters the promising but fast-changing Indian OTT fray.
Disney chief Bob Iger has signaled that he would like for the studio's three flagship streaming services — sports platform ESPN+; Disney+, set to launch next year; and Hulu, following completion of the Fox deal — to operate on a global basis. Whether it will make sense for Disney to roll all three of these services out in India, given that it will already own the leading local player, which is both an entertainment and sports channel, remains an open question.
"Launching a separate OTT platform involves a large spend in terms of branding, advertising, distribution and so on," notes Jehil Thakkar, a partner at Deloitte India. "In the U.S., Disney faces no overlap among Disney+, ESPN+ and Hulu, but that won't be the case in India with Hotstar," Thakkar says.
Analysts are also waiting to see whether the studio will continue to sign lucrative licensing arrangements like its current deal with Amazon for the digital use of Disney blockbusters in India. According to Cuoto, the most likely bet is that Disney will begin to hold back its own IP and throw its capital and content behind building upon Hotstar's strong brand in India to help it continue to compete against Netflix, which "has definitely gained momentum in India over the last 12 months," he says.
Netflix, which has an estimated 1 million subscribers in India, according to MPA, in October unveiled a slate of 17 new originals for the Asian market, more than half of which were projects tailored just for India. Combined with projects already released or underway, this brings its total number of Indian originals up to 24.
"Netflix has definitely turned a corner, but now the key question is: How does it get to 5 million subs in India?" Couto adds. "How about 10 million?"
The most commonly cited potential bottleneck to subscription growth for Netflix is pricing. For its premium offering, Hotstar charges roughly $3 a month, while Amazon Prime is even more aggressively priced at $1.90 a month, or $14.50 for a year (compared to $119 a year in the U.S., which includes its Prime shipping service). Netflix's cheapest monthly plan, meanwhile, is $6.90.
"Given the existing pay TV average price per user of $3.40, there is a fair reason to believe Netflix will cap out at a fairly niche penetration [with its current pricing]," says MPA's Shah.
Few analysts believe Hastings' avowed goal of 100 million Indian users was ever intended to be viewed as remotely realistic in the near term ("It's a bit like John Malone's hyperbole in the late 1990s that Tele-Communications would have 500 channels," says one industry observer.)
However, Netflix is always quick to point out that Indian consumers do pay for quality content, as evidenced by the more than 100 million Indians who are believed to visit a multiplex to watch a Bollywood film about three times per year. Such consumers pay an average $3 per movie, or $12 for a typical family of four. "In that regards, if you're competing with film consumption instead of television, Netflix does have a sizable target market in India as it entrenches deeper into the Bollywood ecosystem," Shah adds.
Hastings has repeatedly suggested that Netflix is content for now to keep its pricing and localized content mix at a premium level that caters mostly to the market segment that Apple addresses in India with its higher-end iPhones — cosmopolitan, middle to upper class, and comfortable with English. Earlier this month the exec publicly pushed back against reports that Netflix was set to experiment with a mobile-only lower pricing tier in India, something that it is known to be testing in Malaysia and Thailand.
But sources close to Netflix say there is, in fact, a lively debate within the company about whether it should nudge prices downward in India to accelerate growth. The case against such a move involves more than just decreased revenue per user, however.
"What if you push prices down to $2 or $3 a month to hit 10 million users, but then you get 30 percent to 40 percent churn?" cautions Cuoto, referring to customer turnover. "What does Wall Street analyzing that climbing churn rate do to your market value? That's a significant concern."
Analysts argue that Amazon Prime Video should be regarded as a different beast altogether than the stand-alone streamers, given how closely the service is tethered to the broader fortunes of Amazon's e-commerce pitch to India. But because of the content-mad nature of Indian consumers, the company views Prime Video as playing an outsize role in Bezos' mission to "transform the way India buys and sells." When it comes to recruiting Prime members, Amit Agarwal, Amazon's India head, has been know to argue that Prime Video is to India what same-day shipping is to the U.S. (Prime membership includes two-day shipping in India, where poor infrastructure still makes reliable same-day shipping an impossibility for any operator).
The stakes for Amazon in India rose considerably in May, when Walmart spent $16 billion to acquire Amazon's main rival there, the homegrown online retailer Flipkart. As Amazon responds by continuing to expand its e-commerce reach into ever more provincial regions of India, it has tailored its Prime Video offerings to match, with extensive efforts at localization, including the launch of the Hindi version of its user interface, with Tamil and Telugu versions coming soon. The company has also licensed or produced content in six of India's 23 main regional languages.
Gaurav Gandhi, director and head of business for Amazon Prime Video, India, says the company's digital streaming efforts "will go much deeper and wider" than they have thus far with the 30 announced originals. Emphasizing the company's commitment to the long haul, he adds: "We are just getting started in our journey in the streaming video business in India."
"Hotstar, Netflix and Amazon — I think they should all be relatively pleased with how far they've come in India in just a few years," says Couto. "But it's just the beginning — every operator, the whole ecosystem, still has a very long way to go."
A version of this story first appeared in the Nov. 28 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.