Will Netflix get successful in India?

India consists of 1.3 billion people and that's Huge. It is such a large population that in the years 1850 to 1900 that’s the total number of people existed on Earth. We all think that larger the number of people larger is market.

Let's think for one moment every user in India owns Netflix's basic package i.e. for ₹200 then revenue will be 1.3 billion x 200 which is approx. 2 trillion. Is it not sound amazing?

Now come to reality. To break into the market, you have to know the market first. So let's understand India first.

Internet

Let's talk about the internet.

Jio’s entry into telephony through the 4G network dropped prices so hard that 41% of the population in India currently uses internet and has active access to internet on a daily basis.

According to the charts of the growth of home broadband versus mobile internet users in India while home broadband is displayed in sky blue you can see that the growth is not great but if you look at mobile internet the growth has been through the roof at this rate we will grow into one of the largest digital economies in the world.

The data consumption per Indian/month was 18.4 GB while in China it was just 14.5 and the global average is much lower at 11.9 GB Indians are spending their time watching content video calling watching movies soap operas etc.

The really challenge India is still hesitant about money while 60% of USA and 50% of China have transacted online, just 10% of India has made a transaction online even though we are one of the most extreme consumers of the internet across the world.

Knowing India

The employment 10% of this country has a permanent salaried gig or a permanent salary job. The rest are all entrepreneurs, Kirana store, owners, blacksmiths, medical shops, plumbers etc. India is a self-employed country with very few people having stable employment.

This creates a nation of nations we actually have three India’s basis
their spending their likes their habits their attitudes.

At the very top there is India one with just 110 million people this is worth 1 trillion of GDP, these people are English fluent they are digitally savvy they know how to use a phone, they know how to use a computer, they have western values and they value convenience over cost.

In fact at the very top of India one there is another India called India one alpha these are the top five percent of tier one cities and the top 0.1% of tier 2 cities these are the people that are fully westernized they have spoken English since the day they were born. These people like brands like raw
pressure or little black book or Netflix. Netflix is saturated on these user groups only.

Now India two has 104 million people and 300 billion dollars of GDP even though the sheer number of these people are the same as the previous segment they contribute less than a third of the GDP. These
people are not very comfortable with English they have some level of digital savviness it’s not great and most importantly they aspire for a better
life and they feel that a mobile phone and the digital world and the content
creators allow them social mobility. These people still use Facebook and they also spend plenty of their time on apps like Sharechat.

Now finally there is India three. India three has 10 times the number of people as India won it has two six million people and 1.3 trillion dollars in GDP now. India three spends most of their time on Youtube and Whatsapp they are less educated they engage in manual labor they could be the construction person down the streets.

More on this can you can find in “India1, Avocado Startups and Product-Market Fit” by Sajith Pai.

India’s Growth

There are 110 million people in India one but companies like Danzo, Zepto, Amazon Prime etc focusing on just five million of the top. Covid made this even worse if you look at the richest 20% in India from 2016 to 2021 their wealth grew 39% if you look at the poorest 20% their wealth dipped 53%.

This is the problem with the kind of system we’ve created where the rich get richer and the poor get poorer whenever there’s an economic collapse. The India one, two and three that I showed you were stats for 2019. In 2021 that changed India one saw five million new entrants while India two became smaller and India three continued to get larger.

We might think that a country like India's growth is driven by agriculture or it’s driven by anything that’s physical but that’s not true. India is truly a cloud country and our growth has been bits not atoms. The IT industry share from 2000 to today has grown from 2.5% to 7.5% pre-pandemic it was closing in on 9%.

The founder of Zerodha keeps talking about startups that are raising money to go after India two and India three will fail because even though there are a lot of accounts that seem not to be transacting users because they make too little money to actually transact. Over 20-year timeline, anything can happen India two and India three can truly grow up and start making enough money to seriously contribute to GDP but as of today, it seems unlikely.

Opportunity

The IT sector has always been India's growth engine in 1999 we only had four billion dollars in IT revenue in 2019 we have 177 billion dollars in IT revenue 35 to 40 percent of total exports in 2022 are from the IT and BPM sectors. It is because today it contributes to half the export volume. It creates more jobs for everyone in this country and even for people outside by direct and gig jobs it has gone from having 1.4 million gig jobs to 3.4 million gig jobs in the last five years the number of startups in India has gone from 3% in 2013 to 12% in 2020.

Because of this interest in this market by venture funding, we are the fourth largest country in the world. In 2021 we are very close to UK we will probably be the third largest soon now we’re still far behind china and the USA but this is a work in progress.

India is growing because it enters The Wang Trifecta model. According to this the overall consumer economy and hence the fintech economy takes off once three conditions are met (This was observed in China) — 1. Cheap Bandwidth. 2) A smartphone in every pocket. 3) A frictionless payment system. India’s had this The Wang Trifecta and that is one of the large reasons why India is growing so fast as a tech economy there’s a steady rise in per capita incomes.

There are lots of e-commerce enablers. If you want to sell in this country you had to start a store go to a place that was crowded stand there in the store for 10 hours a day and hope somebody bought from you for the first time in decades we have the ability to sell online and this has been made possible by Flipkart and Amazon. I truly believe as a country we’re growing up I truly believe this explosion of tech in the country is making everyone’s lives better.

Conclusion

Ony India one alpha and talk about Netflix. Netflix has four and a half million paying users in India, and Hotstar which has a lot of vernacular content which targets India one and India two has 47 million paying users but the granddaddy of them all Youtube which targets India one alpha, India one, India two, India three with 467 million users/hour. It is so large that it eclipses the size of the other two combined the second way. According to a tweet by Kunal shah was speaking to senior folks at e-commerce companies and found that the top 5 million customers probably drive 60 of all online sales in India and also amazon confirmed these numbers and said that even though amazon prime’s numbers are just five to seven million users they account for over 50% this is a tiny user base but the most valuable remember there are 110 million people in India one but amazon is focusing on just five million.

What do you think? Is Netflix Build For India? Will Netflix will increase their target Market to India one and India two? Or does Netflix increase their revenue through India one Alpha?