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BW Businessworld

Bells Jingled All The Way For OTT

All through the pandemic driven gloom, OTT players did brisk business and are expected to grow their domains farther in 2021

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While Covid-19 adversely impacted the earnings of businesses across sectors, one industry continued to thrive through this crisis - the over-the-top (OTT) services that enable streaming media content directly to viewers via the internet. The reason for the growth of OTT services through the pandemic and the lockdown that followed its acknowledgement, is easy to understand.

While restrictions prevailed on movement of people and prohibitions stayed on gatherings, OTT players successfully managed to pull in audiences from multiplexes, live concerts and TV (GEC's) to fuel their growth. The numbers say it all. In 2017, OTT platforms in India generated Rs 2,019 crore in terms of revenue, which is expected to increase to Rs 5,595 crore by 2022.

While Covid-19 has acted as a catalyst in fueling the proliferation of the OTT business, its growth story dates back to pre-Covid times when digital streaming platforms overtook film entertainment to rank as the third largest segment of the Indian Media and Entertainment industry in 2019, according to an EY-FICCI Indian Media & Entertainment Report. However, for the OTT services, Covid-19 has been like growth on steroids. According to India Brand Equity Foundation data, in July 2020 paid subscriptions on OTT video platforms grew to 29 million, a 31 per cent jump in just four months.

Growing Market
As we know, India is now the sixth largest internet advertising market in the Asia Pacific and mobile will continue to be the primary driver of revenue due to increased data affordability, new mobile-first formats, and strategic targeting of consumers. If we look at the size of the streaming ecosystem, currently there are more than 30 OTT players in India across languages. The urban-rural gap in content is not huge and currently around 45 per cent of viewership on OTT platforms is mainly regional content.

A recent PwC report says that the massive investments made by OTT services like Netflix, Amazon, Disney + Hotstar and others in originals as well as acquired content, will help subscription video-on-demand make up 93 per cent of the total OTT revenue (compared to 87 per cent globally) to $2.7 billion, increasing at a compound annual growth rate (CAGR) of 30.7 per cent between 2019-2024, from $708 million in 2019.

The new at-home environment has led to the proliferation of new direct-to-consumer apps, local 'bite-sized' entertainment platforms and user-generated content formats. Looking at the spiked numbers as far as streaming content consumption is concerned, industry insiders say that Netflix, Amazon Prime Video, and Disney+ Hotstar are expected to up their original content investment in 2021.

Even the London-based technology research and consulting firm Omdia has projected that the three OTT players are expected to collectively spend approximately Rs 2,824.9 crore on original content in India. This amount will be higher than the estimated Rs 2,080 crore of cumulative investments planned by local players like ALTBalaji, Jio TV + Jio Cinema , Eros Now, SonyLIV, MX Player, Voot, Hungama Play, and others.

The OTT players are collectively expected to spend Rs 4,905 crore in 2021. According to Mandeep Kohli, Partner, BCG, India continues its unique multimodal growth. "Smartphone video consumption is up with a 50-60 per cent increase in subscribers over last year. Going forward we expect the digital trend to intensify, OTT adoption to continue rising, and the emergence of new business models better suited to the new reality."

Vernacular Reigns
While the earlier spike in OTT consumption in 2020 had come from the metropolises, the focus has now shifted to non-metros and tier- 2 cities. According to the annual media and entertainment report by the Boston Consulting Group (BCG) along with the Confederation of Indian Industry (CII), 35 per cent to 40 per cent of the consumption on OTT services happens in local languages. The hours of original programming that has tripled between 2018 and 2020, now stands at 1,400-1,800 across services as of 2020.

The focus on India originals is fueling the next phase of growth of OTT in India. For example, Netflix Indian originals, which stood at 30 in 2018, have gone up to 90 in 2020 while Amazon Prime Video has gone up from 90 to 110. Right now local players like Zee5 are solely focusing on the vernacular space and experts say the group plans to leverage its reach further by 2021 on the back of its hyperlocal content, something that other players are expected to emulate.

It goes without saying that flogged ahead by the pandemic though it was, OTT's run of good luck amidst the general pall of gloom around the economy is likely to persist through the happier times ahead.