Source of this article: Times Weekly Author: Ma Huan
After General Motors, Ford Motor and Tesla, another United States giant has hit a wall in India.
On September 23, Reuters reported that the India government was investigating Netflix.
An email from India officials, cited by Reuters, shows that India authorities have received details of Netflix's misconduct, visa violations, tax evasion and other practices in India, as well as incidents involving racial discrimination.
Nandini Mehta, a former executive who left Netflix's India branch in 2020, said she is also filing a lawsuit against Netflix in the United States across the ocean, accusing it of wrongful firing, as well as racial and gender discrimination.
So far, Netflix has denied Mehta's allegations and said it was not aware of the India government's investigation.
Source: Netflix official website
Previously, on September 13, an India director accused Netflix's hit series "Squid Game" of plagiarizing his work, and the director is also filing a lawsuit for compensation.
India has long been seen by Netflix as the next big growth market, and in the face of this series of troubles, can Netflix cope with it?
Trouble continues
Netflix's "Squid Game" has taken the world by storm, but in India, it has been uncharacteristically embroiled in a plagiarism controversy.
According to a Bloomberg report on September 13, India film director Soham Shah sued Netflix in federal court in New York on the same day, accusing "Squid Game" of "naked plagiarism" of its own 2009 movie "Luck" and demanding damages from Netflix.
Soham said his film, "Luck," is about a group of debt-ridden and desperate people who are lured into a series of competitive games. He believes that the main plot, characters, themes, atmosphere, setting, and sequence of events of "Squid Game" are strikingly similar to "Luck", and that Netflix's continuous introduction of derivative content such as reality TV shows and immersive experience activities constitutes a continuous infringement of his copyright.
The India director filed for unspecified damages in the lawsuit and asked the court to prohibit Netflix from profiting from Squid Game in the future. In response, a Netflix spokesperson said that the India director was "baseless" and that "Squid Game" was written and written by Korea director Hwang Dong-hyuk, and Netflix will fully defend this fact.
The plagiarism storm has not subsided, and on September 23, Reuters broke the news that the India government is investigating Netflix.
Deepak · Yadav, an official at the Foreigners' Regional Registration Office (FRRO) of the Ministry of Home Affairs of India, said: "We have received details of Netflix's misoperations, visa violations, tax evasion, and incidents of racial discrimination that the company has been involved in doing business in India." He expressed concern about Netflix's violations.
In response, a Netflix spokesperson said that the company was "not aware that the India government is conducting an investigation," but emails from India officials show that Netflix is under increasing scrutiny in India.
Netflix also faces tax requirements from the India government as of 2023. In May of this year, some media broke that India planned to tax Netflix's local operations. India's tax department said the United States-based company has a permanent establishment in India and is required to conduct a tax assessment.
Poster of "Sacred Game" Source: Douban
This means that Netflix will have to pay two levies: the first is income tax, and the second is the "tax equivalent", which refers to the VAT or excise tax levied on the import of goods, which may involve other taxes.
In addition, Netflix may also be subject to stricter content censorship from the India government. According to Reuters, in July 2023, a India government meeting minutes and sources broke the news that India has told Netflix, Disney and other streaming platforms that their content needs to be independently reviewed before it can be broadcast online to confirm whether there is inappropriate content.
Does the localization strategy work?
Netflix, which has rich localization experience in many countries, has not been on a smooth path to India.
Netflix entered the India market back in 2016 and was not an immediate success. It wasn't until 2021 that its co-founder, Reed · Hastings, admitted that he was still groping for the India market.
In fact, after Netflix entered the India market, it once invested a lot of money to hire Bollywood directors and actors in an attempt to copy Bollywood films, but they found that this strategy did not work. India consumers are not easy to conquer – audiences who like to go to the cinema may not like to sit at home and watch Bollywood musicals.
Realizing this, Netflix began to opt for more localized content, producing dramas, romances, and thrillers in the India language. The more successful ones are "Sacred Game", "Cricket Junior" and so on.
"Cricket Boy" poster Source: Douban
Even though Netflix focuses on localization, many users still feel that it is not sensitive enough to produce content, and some of the content will provoke the anger of India. In addition, similar to other countries, the popularity of the platform in India, network infrastructure and other issues have also limited Netflix's promotion in the region.
Netflix also found that the purchasing power of its target user group in India is far less than in other regions, such as Japan and Korea.
In order to attract more subscribers, the monthly fee can only be drastically reduced. In 2021, Netflix announced a 60% reduction in its pricing in India, and after the price adjustment, the subscription price is only 149 rupees (about 12 yuan) per month, which is the lowest price among users in various countries around the world.
To further increase subscribers, in 2023, Netflix expanded the password-sharing ban to all countries, including India, restricting users from sharing passwords with people outside their households.
"The Netflix account is for a family. Everyone living in the household can use Netflix anywhere — at home, on the go, on vacation — and use new features like transferring personal data and managing access to devices. Netflix said.
Netflix's performance in India has grown under the influence of various strategies. As of June 2024, India is the second-highest market for Netflix in terms of the number of new paid subscribers. India ranked third in terms of revenue growth percentage in the second quarter of 2024, according to a letter issued by Netflix to shareholders, but the exact figure was not disclosed.
According to estimates by Media Partner Asia (MPA), Netflix currently has 13 million subscribers in India. Netflix has a significantly lower subscriber base in India than other international markets, accounting for no more than 6% of its total subscriber base, and its revenue is also a small base, which is a key factor in the high growth rate it observes in India.
What's more, there is a large percentage of users who tend to opt for a cheaper mobile plan or a basic package. According to Bloomberg, about 40% of new users choose cheaper and cheaper service options.
To this day, Netflix's market share in India is still lower than that of its rivals, Disney's + Hotstar (38 million subscribers) and Amazon's Prime Video (more than 20 million subscribers).
For Netflix, the market in India is large and tempting, but it takes a twelve-point spirit to keep growing.