Apart from the unique case of China, India has presented the greatest challenge to Netflix in its bid for global dominance in SVoD as major media rivals such as Disney, Amazon, Comcast and AT&T step up their pursuit. It failed to get off the ground at first by refusing to break its global pricing strategy and cut subscription costs to the level not just of streaming rivals but also legacy pay TV. It has since done so by cutting prices in March 2018 to between $3 and $4 a month, as it has also done in Malaysia, but initially even that achieved only a modest spike in growth. After all, even 250 rupees a month, just over $3, is still more expensive than streaming rivals and some legacy pay TV services.
Amazon had got the message earlier and after trimming its prices from the outset has succeeded in amassing about 14 million subs in India from consumers often attracted also by the online retail side of its Prime service in any case, while Netflix is still stuck on about 600,000. However, Netflix now has a third chance to get it right in India by focusing on mobile TV, which is going to be a major driver of growth there for video services. This is also giving Netflix an opportunity to recast its wider worldwide strategy by developing a lower cost mobile-only tier that will account for a growing proportion of its subs and revenues.
India looks like being the proving ground, albeit a large one, for this strategy, building on groundwork already laid by Netflix through partnerships with both smartphone makers and mobile operators. The latest stone in that strategy has just been laid in a deal between Netflix and the Chinese smartphone maker OnePlus, which has become a major supplier in India.
This coincides with launch of the top end OnePlus 7 Pro and OnePlus 7 phones which support Netflix HDR content, which it hopes will provide an edge at the premium end of the Indian video market. Netflix has worked hard to be at the cutting edge of Ultra HD with many of its TV series and movies offered in that resolution with support for HDR compatible screens. A number of phones, including models from Apple, Samsung, Google, LG, Huawei and Sony, have already been certified by Netflix for HDR. The cheapest HDR-compatible phones, such as Huawei’s Honor-10, can be found at prices down to $250 in some markets. The addition of OnePlus to this list is significant for the Indian market where – with fixed broadband availability still patchy outside urban areas – demand for mobile TV is intensifying as quality improves.
As Netflix has been finding, the HDR field is not straightforward (see separate story in this issue), with two principle competing variants, Dolby Vision and HDR10+ developed by Samsung and Amazon as an enhancement of the existing industry standard HDR10 developed under the UHD Alliance. It claimed to improve on the standard HDR10 chiefly through an extra layer of scene-by-scene information to help TVs display the higher contrasts more accurately.
Dolby Vision made the early running on TVs and as a result there is a significant amount of content now available in that format, although mostly only from Netflix and Amazon on the streaming front. Netflix now has at least 100 of its original titles available in that format.
Initially Amazon was the sole source of HDR10+ content but then 20th Century Fox came on board with Samsung and Panasonic to forge the HDR10+ alliance, later joined by TP Vision (Philips TV). Originally widely regarded as an unwelcome complication likely to hold back the HDR movement, the strength of its backers led it to gain traction and mindshare. This attracted other major content houses on top of Disney through its acquisition of 21st Century Fox, parent of 20th Century Fox.
AT&T’s Warner Bros came on board and at CES 2019 Blade Runner: The Final Cut and Wonder Woman was shown running in HDR10+ on Panasonic’s TX-65GZ2000 OLED. Samsung has also collaborated on content with Comcast’s Universal Pictures Home Entertainment, as part of a continued wooing of major studios.
Nevertheless, HDR10+ still lags Dolby Vision in TV and movie content, although the gap is narrowing. On the other hand, most dedicated mobile HDR content is in HDR10, the predecessor of HDR10+, although Apple has some Dolby Vision content via iTunes. However, Panasonic, despite being a lead member of the HDR10+ Alliance, now supports Dolby Vision in its flagship GZ2000 OLED TV as well as its 4K Blu-ray players. So, at present, the trend seems to be towards both being supported on the TV and mobile fronts with no immediate sign of either winning out.
That is because the industry is split, and both have their pros and cons. Dolby Vision supports greater color depth at 12 bit rather than 10 bit and higher peak luminance at 10,000 Nits rather than 4,000 for HDR10 and HDR10+.
On the other hand, HDR10+ catches up with Dolby by adding support for dynamic metadata that HDR10 lacks, enabling it to realize its potential by instructing displays to display color as accurately as possible within their luminance and bit depth ranges. And the Alliance has even made a virtue out of the lower peak luminance by arguing that this allows it to deliver better quality to many existing displays that do not support the higher values in any case. That sounds disingenuous, but it is certainly true that even current top end displays are incapable of displaying higher than about 2,500 nits, so 4,000 is plenty for now.
The other advantage HDR10+ has is being open source and royalty free, which Dolby Vision is not. In fact, it was Samsung’s reluctance to pay Dolby royalties that inspired the decision to invest in enhancing HDR10, which otherwise might well have withered on the vine to leave just one HDR standard.
So now all of Samsung’s 2019 4K HDR TVs support HDR10+, while Panasonic’s flagship GZ2000 has become the first TV to support both formats. Philips also supports HDR10+, leaving LG and Sony solely in the Dolby Vision camp.
On the smartphone side, Dolby Vision is still quite rare and, so far, has been implemented in software, unlike TVs where it is hardware-based. LG was the first to support Dolby Vision in a number of phones, joined by Apple with the iPhone, but few others do, while leading models from Samsung, Sony, Huawei and Nokia have HDR10+ displays.
Now Apple is starting to support HDR10+ as well, as part of a larger change in strategy which has involved making iTunes movies and TV shows available for rental on Samsung smart TVs, which devalues its own devices like HomePod and Apple TV because its services are now available on competing platforms. But in line with its recent launch of Apple TV Plus, such devices are being sacrificed on the altar of services on which the company will increasingly rely for revenue growth.
Back to Netflix, we can detect a shift in strategy there too over China as well as India. For the latter, the focus is on mobile TV at lower prices but for China, Netflix has clearly decided for now to focus just on the diaspora and give up at least temporarily on trying to penetrate the country itself. On this front, it has already made significant progress, notably in an exclusive content licensing deal just struck with Alibaba, China’s equivalent of Amazon. This is for rights to the popular romantic comedy series “I Hear You” from Alibaba’s video platform Youku, with plans to stream this 24-hour episode series outside China.
Even more significant was Netflix’ acquisition of worldwide rights outside China to “The Wandering Earth,” Frant Gwo’s science-fiction blockbuster about humanity’s attempts to prevent the sun from destroying the planet. This movie is currently China’s second highest-grossing release in history having made $700 million and is the third biggest global release of 2019 behind only Marvel Studios and Disney’s “Endgame” and “Captain Marvel.”
Netflix has also been creating originals for the ex-pat Chinese market in preparation for the partnership with streaming companies such as Alibaba’s Youku. It looks like Netflix is preparing the ground for a final Chinese invasion when conditions are right, and that too is likely to revolve around mobile.