Netflix’s viewing engagement grew 30%, revenue 25% in India in 2022: Ted Sarandos

So much has happened at Netflix in 2022. Reed Hastings stepped down after two decades. It was a tough year, with a steep loss in subscribers and stock price. But in Q4, the service added 7.5 million subscribers, beating forecasts. It’s been a roller-coaster ride. What is your top priority right now?

Four years ago, Reed spoke at this conference. Post-transition, this is also my first international visit to this conference. It’s so good to be here today. The first half of last year was pretty rough, as we got off to a slow start, recovering from Covid-19. We had to navigate a whole lot of uncertainties, including shutting down our operation in Russia where we had a million subscribers.

But in the second half of the year, we really kept moving. I think it speaks of the company we have built. We got singularly focused on reigniting growth, and started to focus on content and programming. We even built an ad product from scratch in six months that worked worldwide.

We started with hits like Stranger Things Season 4 and rolled into big global phenomena like Wednesday, with back-to-back hits from all of our content around the world.

The general perception is that it’s been a bit of a hit-and-miss experience for Netflix in India. Earlier, you had said that “there is a trial-and-error period”. Being a matcher of stories to audiences is hard work. Would you say the team is now better at it?

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I believe that our original projects are improving every day. I think it’s a hit or a miss when entering a new market. In my experience, what works in one country may not work in another. It’s essential to be on the ground to understand consumer tastes, culture, industry, and the challenges faced by creators in that country. In India, for example, we noticed a rich cinema culture and a lack of focus on television, which led us to create Sacred Games, our first attempt at combining cinema principles with television. Now, we’ve produced 100 original projects in India, with 28 of them released just last year, and our upcoming slate of films and series for the next year looks stronger than ever.

We’ve invested heavily in India, not only in production but also in having a local team that understands the local culture, storytellers, and audience. Our team running India is based in India, which gives us a big advantage over companies that try to run India from California and get frustrated early on. Our office in Mumbai has 250 people, and we also have an office in Delhi. All of this allows us to create great content in India.

The Netflix subscriber number seems smaller if we were to take unverified standards floating around this industry at face value. But in engagement figures from credible third-party sources like ComScore and App Annie, Netflix leads with 74% engagement. What is the real measure of success? How does Netflix India measure up?

For me, an absolute measure of success starts with engagement. In India, I’ve had the best year of our existence. I’m proud to say that the viewing engagement in India grew by 30%, and our revenue grew by 25% last year.

This wouldn’t have happened if it wasn’t tied to that engagement metric. I understand that a lot of measurement around subscriber numbers makes for nice headlines, but they’re not a real business metric for us. We need to see what’s behind that subscriber number.

Is there engagement, is there revenue and is there profit? For Netflix, the answer is yes!

One of the big successes of Netflix was taking Indian cinema global. We saw the success of RRR and Gangubai. The storytelling simply excited viewers globally.

In my opinion, what’s truly remarkable about RRR and Gangubai this year is that they represent an inflection point, a change in distribution or storytelling, or an alteration in audience appetite.

There were 180 movies to watch on the voting site. Yet, these two were among the most watched. For many people I know, RRR may have been their first Indian movie…. It’s not impossible to have a global hit, but it’s very rare.

You need a distribution platform like Netflix…. The director (the RRR director) himself acknowledged as much at the Golden Globes, noting that most people in the world found it on Netflix.

Another film that’s worth mentioning is The Elephant Whisperers, which is nominated for Best Short Documentary at the Academy Awards this year.

What’s your top priority, now?

Reigniting the growth of our company. The world is moving toward streaming and on-demand. Let’s look at what success means in streaming.

I really think there are only three business metrics. Number one is engagement. We clearly lead the way in this area around the world. The second one is revenue, do people pay? And then, because that can be reinvested in more content and more programming. And then the third is profit—is it profitable? And among all of our peers, we are profitable. Our major competitors are not.

Tech guru Scott Galloway said Netflix spends more on content than the defence budget of Sweden! The truth is it’s actually more than the defence budget which is at $ 17 billion a year. So how much of it is allocated to Netflix in India?

When I tell you that we’re growing engagement and revenue in India, then the next part of that indicates that it gets a little bit bigger piece of the content budget. Basically, we’re trying to constantly get ahead of the growth in the market and figure out what’s working and keep investing.

So, I would say that we are going to grow up investing more and more in India as we can continue to grow engagement and revenue in India.

I just read a piece in Time Magazine that says the streaming wars are now in their “chaos era”. Give us a sense of how the streaming wars are now panning out?

We definitely ignited what I think is the largest explosion of original production, maybe in the history of the medium.

I think, from our perspective, the new generation of entertainers has a lot to bring to the table. People have very diverse tastes and they expect to get what they want. I always joke that my wife and I never agree on what to watch and we love each other enough to be married and live in the same home.

So, people have very different tastes and different moods. So, we began investing in a wide variety of content early on. And our early investment has paid off. We focus on growing soundly, really focusing on consumers.

When House of Cards first premiered in 2019, you said you wanted to become HBO before HBO could become you. More recently, you said Netflix is going to be part HBO, part MX, part Comedy Central and part Food Network. Is this a change of tactic?

No way, it’s actually an expansion! So, yes, we are still offering that programme we discussed back in House of Cards. We used to produce only a few high-end dramas in the early days, but today we produce television programming across every genre, every version of a movie, and every type of movie genre.

When I mentioned that we wanted to be like HBO, I was trying to get straight to the point. At that time, HBO was the benchmark for high-quality programming.

We hadn’t produced anything yet. So, when we entered the market, my goal was for us to be as good at producing programming as they were, before they would get better at managing subscription services and streaming. We wanted to outdo them in terms of quality before they outdid us in terms of streaming. I think we’ve accomplished that to a large extent.

Now, we’ve moved beyond just wanting to be like HBO. It’s similar to Thali in India, which has a little bit of everything. I believe that’s what people want—sometimes they want to watch dramas and comedies, while other times they want to enjoy the rich history of Indian cinema or chat about the latest movie.

We want to be able to provide all of that.

One of the advantages that other platforms have is cricket. You’ve said that Netflix is not anti-sports, it’s pro-profit. But, according to popular belief, you can’t build a mass platform in India without sports. How do you tackle that?

As someone who follows the television industry, I recognise the importance of sports for both pay television and broadcast television. Historically, it has been a significant loss leader. At Netflix, we have proven that we can build a large audience and a successful business without live sports.

One way we engage sports lovers is through our original shows. For example, ‘Drive to Survive’ has had a significant impact on the world of Formula One… We have also seen the impact of our sports documentaries, such as ‘The Last Dance.’ In fact, our international viewing numbers for ‘The Last Dance’ were higher than ESPN’s domestic viewing numbers.

While our subscription model doesn’t currently have a path to profitability for live sports, we do engage with people who love sports through our shows and documentaries.

These great sports documentaries showcase behind-the-scenes action and stories that are often overlooked during live games. So, while we don’t have live sports on Netflix, we do offer unique and compelling content for sports lovers.