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Firstly:-Netflix, (NASDAQ:NFLX) has been one of the most hotly debated stocks in the market in the last 2 years. Based on the stock's meteoric rise from less than $60 to nearly $500 during that time, it's clear that Mr. Market sees great things happening at Netflix.NETFLIX YTD PRICE CHART, DATA BY YCHARTSIndeed, the combination of domestic subscriber growth, higher revenue per user, and global expansion could catalyze further gains for Netflix investors. However, there are significant downside risks, too. Here are 3 important factors that could cause a sharp pullback for Netflix stock.Domestic saturationOne big risk for Netflix investors is that as the company saturates the domestic streaming market, growth could suddenly slow at any time. As of last quarter, Netflix had 36.24 million domestic streaming subscribers: up about 22% year-over-year. Recently, Netflix has been growing its domestic streaming subscriber base at a fairly steady rate of about 6.5 million annually.At this pace, more than half of the roughly 90 million broadband households in the U.S. will subscribe to Netflix by the end of next year. Other, smaller streaming services like Hulu andOnline Shopping for Electronics, Apparel, Computers, Books, DVDs & more's Prime Instant Video will account for a significant chunk of the remaining broadband households.BY THE END OF 2015, MOST U.S. BROADBAND HOUSEHOLDS WILL ALREADY SUBSCRIBE TO A STREAMING VIDEO SERVICE (PHOTO: THE MOTLEY FOOL)At some point, there won't be enough non-subscribers left in the U.S. for Netflix to maintain its growth pace. Netflix stock currently trades at an astonishingly high multiple of more than 100 times expected 2014 earnings. A sharp slowdown in domestic growth could cause investors to think twice about Netflix's valuation, leading to sharp multiple contraction.Long road to international profitabilityNetflix bulls might argue that even if domestic growth is bound to moderate at some point in the next few years, Netflix can rely on international expansion to power its growth. It's true that international markets could provide years of rapid revenue growth.However, investors are ultimately interested in profit, not just revenue. On this score, it's less clear how helpful international expansion will be. Last week, Netflix CEO Reed Hastings stated that he expects Netflix to become profitable in Europe -- where it recently embarked on anambitious expansion project -- within 5-10 years.INVESTORS COULD BE WAITING A WHILE FOR NETFLIX TO BE PROFITABLE INTERNATIONALLY (PHOTO: THE MOTLEY FOOL)Given that Europe now makes up well over half of Netflix's international addressable market (based on the number of broadband households), this is a discouraging estimate. As long as Netflix is unprofitable in Europe, its international operations more broadly are unlikely to turn a profit.It's quite possible that Reed Hastings is trying to dampen investor enthusiasm by exaggerating how long it will take to make money in Europe. Still, investors shouldn't ignore the possibility that Hastings is telling the truth, and international profits are still 5-10 years away.The DVD business is dyingA third potential problem for Netflix stock is that the company's DVD business is fading away. This isn't very surprising, given the advantages of streaming over DVD-by-mail. However, the DVD division's contribution to overall profitability can easily be missed due to the prominence of Netflix's streaming business.NETFLIX'S PROFITABLE DVD BUSINESS IS IN PERMANENT DECLINE (PHOTO: THE MOTLEY FOOL)In fact, the DVD business posted a $93 million operating profit last quarter, which accounted for 79% of Netflix's total pre-tax profit. DVD revenue and profit has been falling at a double-digit annual rate recently, and the loss of this income will have a significant impact on Netflix's earnings power.If Netflix can quickly grow its streaming earnings, then investors will hardly notice the decline of the DVD segment. On the other hand, if domestic growth hits a wall within the next few years and the international segment continues losing money, then falling DVD earnings could be painful indeed.Too hot to handleNetflix has posted strong revenue and earnings growth recently and it has a huge international growth opportunity. That said, its shares trade for more than 100 times projected 2014 earnings and Netflix faces a variety of potential stumbling blocks in the coming years.Netflix CEO Reed Hastings has warned that it could take 5-10 years for Netflix to turn profitable in Europe. On the home front, Netflix's streaming business could start to saturate the U.S. market within the next few years, leading to slower growth beyond then. Meanwhile, Netflix's DVD business -- which is still quite profitable -- is inexorably declining.These factors could combine to create a "perfect storm" where future earnings growth is much slower than what most investors currently expect. This risk may be reason enough to stay away from Netflix stock at its current elevated valuation.Secondly:-Pricing power (or the lack thereof) seems to be one of the biggest risks facing Netflix(NASDAQ:NFLX) today. But the company's leaders don't appear overly worried about it.Why not?Let's set the stage, shall we?Netflix delivered strong earnings in the third quarter, but fell about 700,000 new subscribers short of its own customer addition targets. Share prices plunged more than 17% lower overnight, and have only trended even further down since then.At the time, Netflix leaders pinned the miss on a price increase of $1 per month for new customers. The change actually happened two quarters earlier, but effects may have been masked by the eyeball-magnet powers of Netflix original series Orange Is the New Blackreleasing a new season.The third quarter just might have been the first time we saw the true growth-dampening effects of higher prices. "Slightly higher prices result in slightly less growth," Netflix admitted in its own press materials.So far, so good. Netflix has seen the potential downside of price increases, and acknowledged its existence. But that's where things turn weird.Every public company is required to list its most important business risks in quarterly SEC filings. The third-quarter 10-Q filing from Netflix keeps it simple, throwing us back to an earlier document:"There have been no material changes from the risk factors as previously disclosed under the heading 'Risk Factors' in the Company's Annual Report on Form 10-K for the year ended December 31, 2013."Fair enough -- nothing much has changed, and the company still faces the same set of risks that were identified at the end of the last fiscal year. Surely, Netflix had already pinpointed the price sensitivity of its customers as a significant risk back then, right?Actually, nope (and stop calling me Shirley).That 10-K report mentions "pricing" four times in the Risk Factors section, but never in relation to the company's own service costs. It's always about how the competition could damage Netflix's business by trying out aggressively low pricing strategies, except the one time Netflix worries about Internet service providers introducing bandwidth caps and pay-per-megabyte pricing plans."The relative service levels, content offerings, pricing and related features of competitors to our service may adversely impact our ability to attract and retain members," one passage reads. That's the closest you'll get to an admission that Netflix can lose customers or slow down subscriber growth by raising prices. The important concept of "price elasticity" -- which considers how demand changes when price changes -- simply doesn't come up.OK, so maybe the copywriters and lawyers that produce these SEC filings for Netflix just made a mistake. Maybe investors are supposed to remember their price elasticity risks from Economics 101, since they apply to everyone.But then, Netflix takes the time to spell out other blatantly obvious risks like the fact that share prices might not rise above your purchase price, or the risks of credit card fraud. These, too, apply equally to every company and stock, so there's no reason not to get explicit with pricing-power risks as well.But wait -- there's more!I'm actually quite sure that it's more than a silly oversight. Netflix simply doesn't worry much about price elasticity.Following the third-quarter plunge, Netflix executives hit the conference circuit. On stage, in front of analysts and investors, Netflix's management continued to brush off the price elasticity issue.In November, at the RBC Capital Markets technology conference, Netflix CFO David Wells tried to refocus the discussion on a bigger picture.DAVID WELLS, NETFLIX CFO. SOURCE: NETFLIX EARNINGS VIDEOS."I don't think we're hyper-focused on the quarter," Wells said. "We'll need several quarters to sort of process whether we're seeing long term price elasticity, short term price elasticity, or if something else was going on in the quarter in terms of affecting our growth versus expectations."Conference moderator Mark Mahaney said that he believes in Netflix having pricing power, but with lower conviction after this intermezzo. Wells got back on his soapbox:"I don't know about less conviction. We haven't confirmed that it's a long-term price elasticity issue. I think there's definitely something to short-term price elasticity, because of the coincidence of lower acquisition sort of being tied from a time perspective to the price increase, which means that there is some effect there."And if you go back to your Econ 101 days, there's no free lunch. You would expect there has to be some effect from a higher price. We have healthy retention. We're still growing, it's just slightly lower year-on-year."So I think we still have pricing power and if you look at just the results from the quarter and if you look in our guidance for Q4, our average subscription price is going to grow, right? So we're still net better from a revenue perspective. It just may be that we over-forecasted some growth."Not to belabor the point, but Chief Content Officer Ted Sarandos followed the same party line at a UBS media conference in early December. The moderator asked whether Netflix still believed that the price increase caused slower growth in the third quarter, and here's what Sarandos said:"We said there are lot of moving parts, the timing of original series, the price changes. There are lot of moving parts there, and it's still the case."To summarize, then:Yes, Netflix might be having issues with price elasticity, since price increases indeed appear to slow down the company's subscriber growth.No, we don't know whether it's a long-term or temporary effect -- it's too early to tell.In general, Wells believes that Netflix can raise prices and still walk away with an overall positive effect on total revenues. If anything was wrong here, it would be an overly optimistic official growth projection.I don't know about you, but to me this sounds like Netflix really should break out price elasticity and/or pricing power as a significant business risk. If it's too early to tell exactly what the effects might be, isn't that sort of the very definition of "risk?"On the other hand...It's possible that Netflix doesn't list price elasticity as a risk simply because Wells and company see it as more of an opportunity.An independent market study by price optimization researchers Atenga points in this direction. Atenga surveyed 1,479 Americans on how much they would be willing to pay for streaming video services. The survey population was a cross section of American consumers, skewed just a little bit young, and carries a statistical accuracy of 99% with a low margin of error.Here's how that analysis worked out for Netflix:SOURCE: ATENGA."You can see that they can increase prices all the way up to $14.99 with no material loss in subscribers," said Atenga CEO Per Sjofors, who noted an attendant revenue increase shown in the analysis. " ... You can also see that it is increased competition, not price, that is the reason for the lower subscriber growth. This means that for next earnings call, it will be a repeat of the prior call."So, Netflix should increase their price to $14.99 and use the added revenue to license more content and develop more of their own content. This is the only way they can sustain growth and increase shareholder value."If Atenga's analysis holds water, that would indeed be the best conclusion. The price sensitivity in this survey held steady from $7 per month, all the way up to $15. Leaving service prices in the middle of that range, where they are today, seems almost irresponsible -- Netflix might be leaving a lot of money on the table.(NASDAQ:AMZN)In this view, competition from the streaming services at Amazon and HBO pose much larger risks than a piddly pricing change. And against that backdrop, maybe price elasticity isn't such a huge risk after all. The service may be more immune to price-boost damage than the third-quarter results imply.Still, I would prefer to see Netflix including its own pricing decisions in the SEC-mandated list of significant risks. If nothing else, that risk belongs there until David Wells has enough data to be sure that it doesn't.Last but not the least:-Netflix in India: Will It Be a Blockbuster?tflix recently announced that it is launching in India as part of its global expansion. But will a one-size-fits-all strategy work?On January 6, Netflix Co-Founder and CEO Reed Hastings unveiled his campaign to conquer the world. At the 2016 Consumer Electronics Show in Las Vegas, the on-demand Internet streaming media provider added 130 countries to the list of 60 where its services are already available. “Today, you are witnessing the birth of a new global Internet TV network,” said Hastings.There were no cheers from China, which has been left out of the Netflix plan (along with North Korea, Syria and Crimea). There was some dismay in India, where Netflix is initially offering only around 7% of its US library and limited local content. China and India are potentially two of the largest markets for Netflix. India’s mobile subscriber base crossed 1 billion in October, making it the second country after China to reach that landmark. The younger generation is comfortable watching movies and TV shows on smartphones. India is expected to record 500 million Internet users by the end of 2016, 60% of them accessing the web on mobile phones. China is the clear leader here with 668 million Internet users.So is Netflix wrong in treating India on a par with Anguilla and Aruba? Kartik Hosanagar, Wharton professor of operations, information and decisions, says there is something to be said for a slow-and-steady approach in a market like India. “Netflix probably acknowledges that the Indian market has to be built up slowly rather than in a big-bang fashion,” he notes.“We have launched in new countries by region or individually in the past,” says US-based Anne Marie Squeo, director of corporate communications at Netflix. “We’ve learned a lot from those launches and will learn a lot from this one as well. Given the consumer demand for great content delivered over the Internet, we wanted to start meeting that need now rather than waiting.”NOT A GAME-CHANGERHosanagar doesn’t think Netflix will be a game-changer in India anytime soon. “In the short-term, it won’t disrupt the market,” he says. “Netflix has to solve a number of issues tied to infrastructure. That said, the long-term indicators are that it will have a huge impact on the market. YouTube is already big in India, albeit for short-form content. Netflix will need to adapt. A technology solution made for the US won’t work in India. But once it is adapted, I think it can have a great impact on content production and consumption patterns.”“I think India is a large and important market for most content and distribution platforms, including Netflix,” adds Jehil Thakkar, head of media practice at KPMG India. “Given the nuances of the market, a softer launch will help in terms of learning lessons, evolving practices, building relationships and understanding consumer behavior before a larger and higher profile rollout is made. China continues to be a controlled Internet and content market that does not allow free competition or entry in the media space and this, in fact, heightens India’s importance in the media and entertainment space for the long-term … [Today] Netflix is not necessarily a strong brand in India. Its entry will not have a significant effect—at least in the short-term.”“It is too early to even think of disruption,” says Smita Jha, leader-entertainment and media practice, PwC India. “The Indian consumer base is very diverse.” But, she notes, “the launch of Netflix in India has opened up the debate on OTT [over-the-top content, which refers to audio, video or other media delivered over the Internet without users needing a cable or satellite subscription] in a more serious manner in India. Prior launches by some local players did not create such an impact.” Gurpreet Singh Bhasin, co-founder and COO at One Digital Entertainment, expects that Netflix’s entry will “ensure that domestic players and media giants get more serious about the business and invest for a long-term play.” However, Rajiv Vaidya, CEO of local player Spuul says: “We don’t think Netflix will disrupt the space; it is still a US product, which doesn’t take into account the complexities of India.”The likes of Spuul, BigFlix and Hooq were expecting Netflix to enter the market later this year, says Gaurav Gandhi, COO of the newly-formed Viacom18 Digital Ventures, another Netflix competitor. “Naturally, everyone is evaluating the entry strategy.”A COSTLY PROPOSITIONAccording to Gandhi and other experts, some key factors need to be considered when examining Netflix’s strategy for India:Price: The US cable TV average revenue per user (ARPU) is around $80-$100, while Netflix’s subscription rates are $8-$10. But the Indian cable TV market has one of the lowest ARPUs in the world at $4-$5. At current pricing, Netflix’s basic subscription plan is virtually double.Data costs: Telecom data costs are very high. In fact, some telecom firms are mulling a model in which voice calls are free. Data is used to balance the books. Prices for voice calls are very low: Tata Docomo, for instance, has unlimited voice plans (free calls during the period of the scheme) that start at less than $3.The delivery mechanism: “Globally, Netflix consumption is higher via fixed broadband lines [and larger screen viewing at home]. In India, it is primarily on the mobile. In fact, the entire digital boom is mobile-driven,” says Gandhi. This means even higher data costs.Content: “Netflix will need to grapple with its strategy—whether to be a mass or niche player,” says Jha. “If it is the former, the challenge will be to include [a large amount of] local content so as to effectively compete with the Indian TV broadcast and film fraternity; if the strategy is to go mass, pricing plans may also need to be reviewed as they are currently higher when compared to the average television subscription or film ticket.” Currently, Netflix is offering three plans for India. The basic plan allows users to watch on one screen and costs Rs. 500 ($7.40 at the current exchange rate of $1 = Rs. 67.59) per month. The standard plan (two screens at the same time) is Rs. 650, and the premium plan (four screens) is Rs. 800.Is the hurried globalization plan a result of subscriber saturation in its existing markets and shareholder unease as a consequence?US companies in this space have earlier found they cannot take Western pricing models and extrapolate them to India. Facebook’s second-largest market is India with 125 million users. Out of them, 114 million are mobile users. In the year ended March 31, 2015, the social media giant saw its India revenues jump 27% to $18.26 million and net income rose 33% to $2.4 million. However, revenue per user was 15 cents compared to $10 in the US.If Netflix decides to cut rates, some local rivals may meet it head on. Viacom18 can pick up the gauntlet if it needs a deep-pocket response; the company is owned by the wealthiest Indian, Mukesh Ambani. Hotstar is part of Rupert Murdoch’s far-flung empire. Besides, Hotstar is free. It offers a mix of cricket and local content.CRICKET AND CINEMA“India loves cricket and cinema,” says S. Sadagopan, founder-director of the International Institute of Information Technology, Bangalore. “Netflix has the potential to disrupt, provided it is able to source Indian content, price it right and manage the speed of delivery. A small number would love the Netflix US content, but the real disruption will need ‘Made in India, Made for India’ content.”“We are producing local TV shows in Italy, Brazil, the UK and a number of other countries, and expect that list to grow globally along with our service,” says Squeo, the Netflix spokesperson. “In 2016, we plan to spend about $5 billion on programming rights, including many titles that will be exclusive to Netflix around the world. However, content licensing has traditionally been very fragmented and regionalized. It will take some time, several years at least, to get to an offering that is the same everywhere.”© SHUTTERSTOCKContent matters, experts note. It dictates strategy, pricing and positioning. Local content will have a market in rural areas. But affordability remains an issue and will require out-of-the-box thinking.In addition, there are other basic hurdles to cope with. One major issue is bandwidth. “The biggest challenge is bandwidth availability,” says Sadagopan. “Hopefully … enough bandwidth will be available soon.” Adds Mohit Jain, research analyst-technology at securities firm Anand Rathi: “Expensive and inconsistent Internet speeds are the biggest challenge for Netflix in India.”“I suspect the low-key entry reflects the fact that India’s broadband penetration is low,” says Hosanagar. “Even where a household has broadband, speeds are not true broadband. Netflix will need to make the same kinds of investments in infrastructure in India as it has made in the West. This will include investing in content delivery networks so that its content is stored as close to the end-user as possible. It will need to invest in some additional infrastructure in India to adapt to the mobile. It will need to partner heavily with telecom operators in India. With all of that, Netflix will have a fair shot.” Reliance Jio will be launching 4G services in the country soon (it is in beta now). So, the Netflix launch may be anticipating that.Squeo of Netflix has an answer to the infrastructure issue. “Netflix automatically adapts the data rate of the video stream to meet the bandwidth available to the member at any point in time,” she says. “Our adaptive streaming engine allows us to automatically adjust the bit-rate of the video stream based on a member’s bandwidth so we can eliminate buffering. We do this by encoding video content for a multitude of devices and formats so we can deliver the one that will provide the best viewing experience.”There could be other hiccups. Censorship, for one. “The latest James Bond installment has had its license to thrill revoked after [Indian] certification board orders scenes with kissing to be cut by 50%,” said a recent report in UK newspaper The Guardian. House of Cards and other programs available on Netflix may face backlash due to the use of four-letter words and other racier content. Then there is piracy: In India, sharing and downloading of copyrighted material is rampant. And credit card frauds have spread to the extent that people are wary of giving information online. Netflix requires card details for even the one-month free trial period, which may prevent many from trying the service.Is the hurried globalization plan a result of subscriber saturation in its existing markets and shareholder unease as a consequence? Baird Equity Research downgraded Netflix’s stock from “buy” to “neutral” on January 4. “The push toward increased original programming and content costs generally could pressure profitability and cash flow more than expected,” wrote Baird in a note. “…The international markets have lower broadband penetration rates, lower credit usage and lower TV ARPU, all of which could hamper Netflix’s growth in those markets.”Zacks Investment Research put the Nasdaq-listed stock on its “sell” list. Netflix shares dropped some 7% after the downgrades. However, Netflix’s stock price doubled in 2015 and the fall may be the result of overly high valuations and investors booking profits.“It appears Netflix has not done enough homework—the way it is priced initially and the content available at launch time is anything but rich,” says Sadagopan. But Netflix changed the rules of the game and adapted along with its customer base in the US and elsewhere. It is capable of doing so again.Lastly, I am an Indian User and if I had to choose I would no choose Netflix because there isn't much content and the subscription is quite high compared to USA( we are not idiots you know!).Source:-http://www.fairobserver.com/region/central_south_asia/netflix-in-india-will-it-be-a-blockbuster-42401/Netflix Expanding Into India: Opportunities And Challenges3 Reasons Netflix, Inc.'s Stock Could Fall -- The Motley FoolShouldn't Netflix, Inc. Be Talking About This Risk? -- The Motley Fool