# Echo81: Why Netflix Failed In India And China

Content

  1. What to expect from Apple’s report
  2. Cheerful news
  3. About Netflix, India’s middle class and why India won’t be the next China

What to expect from Apple’s report

Tomorrow Tim Cook will tell you how Apple spent the next quarter. Probably, Apple will report on the growth of services. But the results for the 3rd quarter (the company has its own fiscal year) are important for two reasons.

First, for Apple, the third fiscal quarter is traditionally the saddest. In anticipation of new iPhones, no one is buying old devices. And the coronavirus only strengthened the trend, the share of iOS fell, but the share of Android grew. Plus, the company won’t be able to play with numbers. This 3th quarter / 4st quarter can still be tightened by manipulation with the start of sales. Well, with the second quarter, you can think of something like it was done before when the supply of outlandish color iPhones was delayed. And the third is always low sales. The intrigue is whether Tim Cook’s accounting department can come up with something. Analysts expect the result to be a couple billion worse than in 1. If so, then Apple will prove its unsinkability. I would bet that the result will be more likely at the level of 2019.

# Echo81: Why Netflix Failed In India And China

Cheerful news

In 2019, the world discussed the change of power in Kazakhstan, when Nursultan Nazarbayev formally resigned from the presidency, but retained a special status, calling himself “Elbasy”, or the father of the nation. Western media called what was happening “a dangerous precedent” and in every possible way condemned. But not everyone remembers that back in 2015, Huawei founder Ren Zhengfei went this way. The founder of the company took on the role of the supreme mentor, the father of the company, creating a system of 3 deputies around him, each of whom becomes a “caliph for an hour”, or rather, performs the role of CEO for six months with the support of the other two and an advisory board of 4 people. While Mr. Zhengfei remains irreplaceable, the board of 7 (3 replacement CEOs + 4 advisors) is elected by vote. Moreover, this is quite a real vote, since Huawei is owned by employees, and Ren Zhengfei has about 1.5% of the shares. Ordinary employees elect 60 representatives, to whom those who wish to lead the company speak. And these 60 representatives are already voting on behalf of ordinary employees.

Needless to say, everyone in the West was very happy about this kind of real democracy in the heart of the Chinese company itself, talking about a combination of leadership and democracy. To some extent, the system is correct, because, firstly, the council of seven under the sensitive mentorship of Mr. Zhengfei can outline a development strategy, and given the change of power every six months, none of the timers will have time to sit in a chair. Second, Mr. Ren Zhengfei himself has strengthened his position. If anything, there are always guilty ones, and he is above everyone.

I remember the unusual Huawei system every time I see news on the topic in the Russian media. We already have one favorite term that was translated directly – roadmap, roadmap. It’s a mystery to me why they translate literally. After all, a roadmap is a strategic plan, an implementation plan, a step-by-step plan, an implementation route. Well, this is not some scientific term to translate literally. In the case of Huawei, for some reason, they also prefer to translate head-on: “On the opening day of the first Better World Summit, the rotating chairman of Huawei, Guo Ping, talked about …”

And every time I see such news about a rotating CEO, a certain picture is immediately drawn, and I am very happy for Huawei. I suggest you rejoice too.

# Echo81: Why Netflix Failed In India And China

About Netflix, India’s middle class and why India won’t be the next China

In the last episode of Echo I wrote that I finally believed in the doom of Netflix’s business model, and it immediately flew in that I was wrong. Like, there is India, which, like China, will explode, and everything will be fine with Netflix. And there are a lot of other countries where there is no Netflix.

Let’s order.

I stopped believing in Netflix at the end of the quarter, when it turned out that the company had signed a record number of new customers and even made money. And, it seems, this is good news, but actually not. Below is a map of the world. Countries in which Netflix is ​​officially present are highlighted in red. Everything is done as it should: support for online payment, local prices, if there is no voice, then subtitles are translated.

# Echo81: Why Netflix Failed In India And China

Netflix has been present in nearly 200 countries around the world since 2016. Of course, the service is developing and the number of subscribers is growing, but quarantine served as a catalyst. People were sitting at home. And if during the quarantine a person did not subscribe to Netflix, then what should happen for him to do it later?

Accordingly, under quarantine conditions, when a record number of new users signed up (15 million in the first quarter + 10 million in the second), and the costs of producing new films and TV series were canceled, Netflix showed a profit. But the company’s CEO immediately warned that as soon as filming began, the company would again become unprofitable. Netflix currently has 193 million paying users. This is a huge number. How many more users does it take to finally make the service profitable? Rather, additional ways of monetization are needed.

Two words about China

Netflix really wants to go to China. But to do this, you need to get the appropriate permission from the Chinese government, which, in turn, requires that the service obey the censorship. What a blow to the reputation if the Orthodox Western service obeys the communists! And censorship bans in China are quite strict, whole scenarios are regulated there. For example, Game of Thrones is formally banned in China.

But the main reason why Netflix doesn’t venture into China is financial. Everything in the local market has been tight and busy for a long time. Just as there are dozens of app stores, there are dozens of streaming services, ranging from Xiaomi and Alibaba to small bipods that not even all Chinese people know about. And most importantly, all services are significantly cheaper than Netflix. Annual subscriptions average $ 4.9-5. It should also be understood that entering a new highly competitive market is always an abundance of spending on promotion. And chances are high that without gaining significant market share, Netflix will simply burn up budgets.

But Netflix hasn’t given up on plans for China. The service has a different strategy. First, he is looking for partners in China to demonstrate his products. By the way, the iQiyi streaming platform was previously a Netflix partner in China. Its CEO said in an interview that they refused to cooperate, as Netflix films and TV series did not suit the tastes of local viewers and were not watched enough.

Another strategy is that Netflix is ​​still actively translating its products into Chinese. The idea is to hook the Chinese outside the country to the service. Taking into account the annual pilgrimage (on Chinese New Year) to their homeland, the Chinese infected with Netflix should quietly spread word of the service.

It all looks pathetic enough, right?

How India will become the new China, and Netflix will ignite there

I cannot resist, because the comparison of China and India is one of the most pleasant and interesting thought experiments, during which it turns out that these two countries have nothing in common, except that both here and there the population tends to 1.5 billion. But in fact in fact, and it is not. Demographers predict that the population of China, having reached this impressive figure, will decline and by the middle of the century will amount to 1.3 billion. This is due to the world-famous policy of regulating the number of children, which has created a significant gender imbalance. But India, on the contrary, should become the largest economy in the world (in terms of the number of people) by 2050. The size of the population will be 1.7 billion. But whether India will equal China in terms of income is a big question.

China began to carry out reforms for the transition to a market economy back in the 70s. They were allowed to travel to provinces and cities in search of work, closed unprofitable state factories that freed up tens of millions of free hands, created economic zones, invited Western companies, and made way for foreign investment.

Another point is that China itself has been actively investing in development. I think it would not be a mistake to say that China has the most advanced infrastructure in Asia – multi-lane highways, high-speed trains, air traffic, ports. All this is directly linked to production facilities. China has become a world factory where it is convenient and profitable to keep production. And this fact still keeps many companies there. He made a thematic release about the problems companies face when trying to transfer capacities, for example, to Vietnam.

Now let’s look at India. Attempts to start economic reforms were made only in the 90s. But, frankly speaking, there are no particular successes in this matter, and already in the “zero” reformist activity began to decline. Although, of course, I’m not entirely right. Thanks to the reforms, it was possible to significantly reduce not even poverty, but the poverty of the rural population, bringing it to the level of poverty.

Accordingly, the infrastructure in India, with its broken roads, trains arriving with many hours of delays, and problems in education, make the country unattractive for foreign investment. For example, Apple has been trying for several years to transfer the assembly of the iPhone to a factory in India (two reports have already been leaked in the media), but each time the answer is the same – the low qualifications of Indian workers do not allow assembling high-quality iPhones. It should be noted here that in the iPhone, unlike other smartphones, where everything is assembled in blocks, there are many components that have to be installed manually.

And speaking of workers, it is important to note another point. Several generations of Chinese have worked hard for a bowl of rice in the hope of a “brighter tomorrow.” In terms of ideology, China is a monolith, an authoritarian regime with a single culture, which citizens are used to obey without hesitation. In turn, India is a much more multicultural country, with 70% of its population living in villages. At the same time, such an atavism as the caste system is still strong in India.

For an understanding of the development level in India, look at the graph from the Mastercard survey. This is a study from the end of 2016, but the basic alignment is still correct. The graph shows what amenities are available in households. Please note that even in a relatively rich cut, there is not a toilet or tap water everywhere.

# Echo81: Why Netflix Failed In India And China

Well, most importantly, pay attention to the level of Internet availability. Thanks to a low start and cheaper smartphones, the country has shown significant growth rates of Internet penetration among the population in the past 3 years. Currently, there are 503 million Internet users in the country. On the one hand, this is an inspiring figure, even 10 percent of which can make Netflix profitable.

On the other hand, if you look inside this figure, then everything is not so happy. Nielsen released a 2019 study. Already the first breakdown by device shows why Netflix failed in India, amassing about 2 million subscribers in 2 years. Whether in the city or in the countryside, people use their mobile phones to access the Internet.

# Echo81: Why Netflix Failed In India And China

Well, the average access speed puts an end to Netflix. The average Wi-Fi speed in India is around 5 Mbps, mobile internet speed is 11.5 Mbps, and wired internet speed is 35 Mbps.

The average price of a smartphone for India is 9 rubles when converted from dollars. For comparison, in Russia it is 500 thousand rubles, and in the USA, according to Statista for 16.5, it is 2017 dollars, or 567 thousand rubles.

Summing up, we can say that in terms of the distribution of video products, India is still tightly in the era of collapse and flea markets, when films and programs are sold on discs. The population of the country, both physically and mentally, is not ready to pay for content, especially considering that all Netflix novelties appear on DVD the same day. I have no photographs from India, but in terms of piracy, the situation is similar in Mexico. By lunchtime, DVDs with the new series of The Mandalorian, released in the morning, were on sale.

# Echo81: Why Netflix Failed In India And China

India still has a couple of decades to go. If everything goes well, then in 5-8 years the first fruits and groups of users of a significant size will begin to appear, who will agree to pay for the service. But this is also a big question. The coronavirus pandemic has shown how fragile the global economy is. And as you know, all economic troubles primarily hit the weakest economies in the world.

Well, speaking about India, one specific fact should be noted. If you look at the revenues of cinemas, you will suddenly find that in 2017 Hollywood films brought in only 10% of the entire box office. In India, they love and appreciate domestic films and TV series, where elephants sing, dance and everything else in the best traditions of Bollywood. Local video production takes up most of the airtime of TV channels and cinemas. Netflix regularly makes original content for India, but the company needs a lot more to get attention.

Conclusion on Netflix

Netflix has been consistently losing money since 2014. The company loses money every year.

# Echo81: Why Netflix Failed In India And China

In 2018-19. 3 billion a year, before that 2 billion. Netflix’s total debt has already exceeded $ 15 billion. The company was unable to make money when it was practically alone in the market. Now Amazon Prime has strengthened its position, Disney + has appeared, streaming from NBC, Quibi, and because of the coronavirus, people have less money. And, most likely, the company will simply not live to see the moment when everything will be fine.

Back to content >>>

Share




we are in social networks:

Anything to add ?! Write … eldar@mobile-review.com

 

Related Posts

Leave a Reply

Your email address will not be published.