Netflix (NFLX) Cuts Video Quality In India On Coronavirus Woes

By Zacks Investment ResearchStock MarketsMar 25, 2020 09:25PM ET

www.investing.com/analysis/netflix-nflx-cuts-video-quality-in-india-on-coronavirus-woes-200519197

Netflix (NFLX) Cuts Video Quality In India On Coronavirus Woes

By Zacks Investment Research | Mar 25, 2020 09:25PM ET

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Netflix (NASDAQ:NFLX) is lowering its traffic on network providers by 25% in India for a period of 30 days, following a similar move in Europe in a bid to reduce Internet congestion as a result of the coronavirus pandemic.

The announcement follows an appeal from Cellular Operators Association of India (COAI) to on-demand video streaming service providers to temporarily migrate from HD (hi-definition) to SD (standard definition) streaming.

Additionally, representing Bharti Airtel, Reliance Jio and Vodafone (LON:VOD) Idea, the COAI further urged for a period of no advertisements and pop-ups on websites as these add to high bandwidth consumption. If required, these can be replaced with public announcements or awareness regarding the coronavirus.

Apart from Netflix, other streaming services approached by COAI include Amazon’s (NASDAQ:AMZN) prime video, Alphabet’s (NASDAQ:GOOGL) Google-owned YouTube, Disney’s (NYSE:DIS) Hotstar, Zee5, Alt Balaji, Voot, Sony Liv, Viuclip, Hoichoi and SunNXT.

Netflix, Inc. Price and Consensus

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Usage in India Spikes on Lockdown

Per a TechCrunch report this week, Internet service providers in India are witnessing a 10% increase in the volume of daily traffic and data consumption according to the Bank of America (NYSE:BAC).

With the government-initiated country-wide lockdown on Mar 24 for a period of 21 days, a surge in demand for online video streaming is expected to rise as more and more people are spending time at home, in line with social-distancing guidelines.

Notably, the amount of time people spend streaming spiked more than 20% worldwide in mid-March, per a Bloomberg report.

Amazon, Youtube Lower Video Quality

Netflix's rival, Amazon prime video has begun efforts to reduce streaming bitrates in India. Moreover, Facebook (NASDAQ:FB), YouTube, TikTok, Viacom18-owned Voot, and Sony Liv are, by default, offering video streams in SD (480p) on cellular networks in India.

Notably, Disney’s Hotstar does not provide HD content on ad-supported free service. ZEE5 has also initiated measures to restrict the streams being delivered on any device at the player level, which will ensure that the existing bandwidth is not overstretched.

Nonetheless, Netflix has lured mobile phone users in India with continuous original regional content expansion and cheaper subscription of INR 199 per month, which is SD quality by default to boost declining subscriber growth.

India has over 687.62 million Internet users with around 22.26 million wired broadband users, while the remaining 665.37 million are mobile or wireless internet users, per a TRAI report.

This indicates that a large part of the streaming, gaming, remote working, online education, digital healthcare, payments and other critical services’ pressure will be on mobile networks in India.

Notably, telecom service providers like BSNL and Reliance Jio have introduced work-from-home plans to help subscribers with additional benefits during coronavirus-led confinement.

Such initiatives by streaming and Internet providers have resulted in lower resolution streams and heavily-compressed content in various parts of the world, which is likely to be beneficial as users stay at home as a precautionary measure.

However, at the same time, a drop in Internet speed and reduction in bitrates are likely to hamper the quality of video and audio files.

Netflix currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Netflix (NFLX) Cuts Video Quality In India On Coronavirus Woes

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