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“Following up on its disappointing results for the last quarter, Netflix wants to aggressively build its international footprint, and there are few better or more important markets than India,” Alvin Lieberman, executive director at New York University’s Entertainment, Media and Technology Initiative, said. “India’s OTT demand is expected to grow rapidly and having a low-priced mobile-only offering is a way for Netflix to expand its subscriber base.”

It’s not like Netflix is completely foreign to India. Netflix has about 5 million active accounts in the country; the problem for the company, though, is that the vast majority of the customers are on month-long free trials. Only 6-8% of Indian subscribers are actually paying customers, according to research shared by Counterpoint, a market research firm.

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Its new mobile-only subscription, which will cost 199 rupees, or about $3, per month, will come at a sharp discount to its next cheapest Indian subscription, which runs 500 rupees, or a little more than $7, each month.

“It’s the right move for [Netflix],” Gene Munster, managing partner at Loup Ventures, said. “When you look at the potential levers in returning Netflix back to a sustainable subscriber-addition story, India is [in] orders of magnitude their biggest lever. The U.S. is close to saturated, and the rest of the world is not as saturated, but India is a great opportunity.”

Analysts also see India as a critical testing ground for Netflix as it strategizes how to continue to grow in the U.S.

Munster said that he suspects Netflix will “bring that [mobile-only] option here and to Europe” eventually. Netflix already has 60 million U.S. subscribers, but it just reported a dip in domestic accounts for the first time in a decade; Netflix blamed its recent price hikes for the minor user exodus.

A cheaper, mobile-only subscription might help draw some reticent Americans into the fold. It also could drive user growth in other budding markets, as well, Tom Harrington, a senior research analyst with Ender Analysis, said.

“These issues of pricing and cheap competition are not limited just to India,” Harrington said,
“but all across Southeast Asia and parts of Africa, where $10 a month is extremely expensive.”

There’s good reason to believe a mobile-only subscription will be particularly appealing to Indian viewers. Americans access the internet about a third of the time using their phones; Indians, on the other hand, reach the internet nearly 80% of the time through their mobile devices.

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Smartphone use in India is also on the verge of exploding. Right now, about 400 million Indians use smartphones; by 2022, that’s expected to reach more than 800 million people, according to Cisco. If Netflix can grab 5% of the smartphone market by that point, it could be looking at an extra 40 million customers — and $1.5 billion in annual sales. And that might be a conservative projection, considering Netflix has grabbed 18% of the U.S. market. (Netflix chief Reed Hastings last year said the company’s next 100 million subscribers will be “coming from India.”)

Still, Netflix will face stiff competition. Disney-owned Hotstar, the dominant streaming service in India, recently hit 300 million monthly viewers. Most of those viewers opt for Hotstar’s ad-supported model — placing another hurdle in Netflix’s path to charging viewers for content. (Hotstar also offers an ad-free service for 999 rupees, or around $14, per year.)

“It’s a necessary move,” Harrington said about Netflix’s $3 subscription. “There are cheaper, quality alternatives in India that make Netflix seem a poorer option – the inverse to North America and Europe.”

He continued: “Hotstar — which Disney devoted a whole section to at the Disney+ launch — carries the Indian Premier League [the country’s leading cricket league], automatically making it the go-to streaming service.”

Munster also pointed out two other potential roadblocks: content and piracy.

Netflix has launched 16 Indian TV and film Originals so far, including “Sacred Games,” a series based on a best-selling crime novel. It also just signed deals with Blumhouse and Chernin Entertainment in July to help bring more Originals to India in the next year. Moving forward, Netflix has another 22 upcoming movies and series in production, according to a person familiar with Netflix’s Indian slate. Adding strong content will be essential to not only attract viewers, Munster said, but also compel viewers to pay for Netflix, in a country where piracy is a major concern.

Still, Netflix’s mobile-only push looks promising. Grabbing even a fraction of the Indian smartphone market would lead to tens of millions of new customers. For Netflix, like any other tech company, user and subscriber growth is the name of the game on Wall Street. And those mobile-only customers could eventually upgrade to its more expensive subscriber tiers, helping to further boost revenue.