February 21, 2024
📰 FEATURE STORY
Can a Netflix-like model help India’s edtech sector?
Most of us have become used to some sort of subscription model in our lives. Whether it be for entertainment or something else. Ever since streaming platforms began dominating our entertainment landscape, consumers have weighed the pricing of each service to see what gives them the most bang for their buck.
What if this scenario applied to the education technology (edtech) sector? Online learning has become somewhat ubiquitous, at least in urban India. The sector isn’t exactly free of hardships, financial or otherwise. Why not a subscription or Netflix-like model? Give people access to reliable educational content and generate revenue.
Context
The edtech sector in India has raised about $4 billion in private investment over the past five years. The market is expected to reach over $10 billion by 2025, with 37 million paid edtech users. Two things are driving this – usual academic content is in demand in urban areas, and increasing demand for nonacademic courses in second and third-tier cities. On a broader level, there’s also a demand for more customised content.
The pandemic catalysed and, in many ways, forced people to adapt to online education. Companies began to strike while the iron was hot. The most notable players in the game are Byju’s, Unacademy, upGrad, and Vedantu, to name a few. They all saw market potential. In 2020, there were over 1,000 universities, 42,000 colleges, and about 40 million students in India. That necessitated technology to bridge gaps.
While the exact numbers vary, it’s safe to say there are thousands of edtech startups in India. The government has recognised the importance this sector and the companies play. The National Education Policy’s (NEP) emphasis on technology will increase demand for edtech products and services. The government has also allowed 100% foreign direct investment (FDI) in the education sector.
That being said, the government isn’t blind to some of the tactics and distortions in the edtech market. In 2021, the Education Ministry issued a public advisory for citizens to tread carefully while dealing with edtech companies.
Part of the reason the edtech sector in India took off the way it has is due to China’s dominance in this field declining. In 2018, the country banned for-profit kindergartens from getting equity-market funding. That evolved into a full-fledged crackdown. In 2021, the tutoring sector was banned from providing classes on ongoing school curriculums.
One of the challenges that the sector faces is money and audience retention. How much should they invest and spend to keep people on the platform? Byju’s, arguably the most valued edtech company in India, has had a rough go of it recently. Its aggressive expansion through acquisitions and spending hasn’t panned out the way it wanted. Combined with declining investments, it’s a double whammy for the sector.
One approach is perhaps a Netflix-like subscription model. Would such a model, with a base price and tiers thereafter, alleviate some of the sector’s woes?
VIEW: It just might work
You’ve got to look at the edtech sector as somewhat similar to a big interactive digital media company. Take Physics Wallah as an example. Its app has 2 million users logging in daily to spend a certain amount of time browsing material. It runs regular classes that have 50,000 learners in real-time. There are instructors at the ready if anyone gets stuck mid-lesson. AI is deployed to help predict the parts a student might have trouble with.
While online education continues to grow, the specific sub-sector in focus should be the online test preparation market. That’s where the real demand and opportunities are. Every year, millions take exams to get into premier medical and engineering institutions with limited seats available.
With this kind of engagement opportunity, it seems like a no-brainer to monetise. It could be about $50 a year for an average customer. That’s less than a Netflix connection for two devices. Some have already adopted similar models. Bengaluru-based Seekho is aimed at working professionals and small business owners. It has 1 lakh-plus paying subscribers who can access over 5,000 edutainment microsites. There’s also Yellow Class. While it started out as a free platform, its co-founder, Anshul Gupta, has plans for a subscription model.
COUNTERVIEW: Need to tread carefully
The problem with the edtech sector is that it can be a cash-burning business. The main goal for such platforms is to retain their users. In a price-sensitive market, free is always the bright and shiny object people gravitate toward. The questions that companies should ask themselves are, would a subscription model bring in more people to the platform, and would existing users remain once they hit a paywall?
If an edtech platform is going to have a Netflix-like model, then there are certain things they need to get right. The content must be reliably curated to keep people on the platform and bring in new subscribers. A survey from 2022 showed only 30% of parents were likely to renew current subscriptions for K-12 edtech providers. Take the JEE-NEET and undergraduate test preparation segment as an example. People prefer offline competitors since the quality is considered better.
For edtech companies, customer acquisition costs have increased due to a higher dropout rate. With increased dissatisfaction, the customer lifecycle is lower. Companies are under pressure from investors. They want answers on scalability and profitability. Once you go past the ‘freemium’ model, companies will find it hard to balance offering quality content and services for free, but also not wanting to price people out.
Reference Links:
- The Indian Edtech Market: What Founders Need To Know To Attract Investment – Forbes
- ‘How is India’s edtech economy looking to shape in the coming years?’ – Times of India
- The Netflix model may just save India’s online learning apps – Deccan Herald
- This Bangalore startup is building a Netflix for educational content – Your Story
- Screwvala may have a point but blame games won’t help India’s edtech arena – Moneycontrol
- Edtech companies need to rework models to keep parents happy – The Economic Times
What is your opinion on this?
(Only subscribers can participate in polls)
a) A Netflix-like model can help India’s edtech sector.
b) A Netflix-like model won’t help India’s edtech sector.
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