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Desi Tadka All The Way

Even as the Indian OTT (over the top) video industry is attracting serious attention from global behemoths, Indian players dominate the market

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Remember the days of ‘snackable’ content trying to connect with digital consumers, who are both growing in numbers and changing the ways businesses traditionally reached out to them? Those days of ‘short format’ are well behind us. Recall debates of television versus digital and the lack of foresight or revenue in web-only? Those conversations too are officially passé now. Been part of discussions where global companies dominated the newer media platforms market and Indian players lagged? That is no longer the case either.

It’s not just the pace at which digital is evolving but is a direct result of the perfect storm brewing in India with device proliferation, data access, audiences giving clear indications of their online preferences and the ingenuity of the Indian entrepreneur in identifying and preparing for market trends. As cliché as it may sound, in this new reality, content has become both king and god.
Brands are turning publishers, telcos are becoming distribution channels, global players have earmarked India among their serious investment markets and traditional media businesses have not lost a beat in capitalising on the new opportunities. What we have is the formation of an industry that is rushing towards its tipping point.

OTT of course!

The rise of mobile may have deemed it a no-brainer for broadcast companies to create their online presence, but international players seized the opportunity to create locally-grown OTT (over the top) video platforms — Hotstar from the Murdoch stable, Voot from Viacom or SonyLIV from Sony Pictures are some examples. Telcos such as Airtel, Vodafone and Reliance Jio added their own OTT brands, and Indian independents too joined the space. Add to this international pure-plays such as Netflix and Amazon Prime Video and we have an industry that can be aptly described as cluttered even before it showed signs of promise or maturity.

Any business strategy that OTT video players had devised in India a couple of years ago, is out of the window due to the change in ‘pipes’ or content delivery and access mechanisms. The investments in web-based video content creation is estimated to have crossed $1.26 billion (over Rs 8,100 crore) in 2017. In the next 60-months, this figure is expected to more than double as more money gets invested in producing web-series, web-exclusive films, web-shows and other web-based formats that virtually operate in an unregulated regime.

In India specifically, the OTT video market is pegged at $280 million with 100 million active user base. By 2023, India will have 970 million smartphone subscribers. The smartphone data traffic is also expected to grow 11 times to 14 exabyte (EB, one exabyte equals one billion gigabytes or GB) per month compared to 1.3 EB in 2017, says a report by the Cellular Operators Association of India, the apex body of all GSM mobile operators.  Unlike the highly regulated DTH and digital cable services, the OTT and web-based free content is operating sans regulatory framework, which is perhaps a significant contributor in its growth. “We are not regulating the OTT services at present, but we may be coming out with a consultation paper on certain aspects of the business,” says R.S. Sharma, Chairman, Telecom Regulatory Authority of India, the regulator for the telecom and broadcasting sector.

Be that as it may, OTT platforms are growing rapidly, led significantly by the brands created for the Indian audiences.

A story of growth & growth
“There are three main factors that have contributed to the growth of streaming video in India. The cost of data has dropped over the last two-years, enabling an expansion of streaming services and adoption of these services beyond the high-income metro demographic. The proliferation of smartphones—India is the second largest smartphone market in the world. And finally, India is still a 95 percent-plus single TV household country and this drives TV content to be fairly homogeneous. Therefore, the demand for individual content is now being fulfilled through smartphones and video streaming services,” explains Jehil Thakkar, Partner, Deloitte India.
In the first quarter of 2018, Netflix had 125 million streaming subscribers worldwide with less than one percent estimated to be in India. Amazon’s Prime membership programme has now topped 100 million paying members worldwide, CEO Jeff Bezos said in his annual letter to shareholders in April. Hotstar, owned by Star India, has reportedly 150 million monthly active users. YouTube, which straddles the space even though not adhering to a conventional OTT definition, has over 230 million active users in India alone.

Says Abhesh Verma, chief operating officer of nextGTv, a subscription-driven mobile TV and entertainment app: “Over the last three years, nexGTv has emerged as one of India’s leading OTT video entertainment platforms, and ranks among the top 10 paid mobile TV and entertainment apps.” It claims to offer over 130+ live TV channels and over 50,000 hours of videos on demand.

ALTBalaji has been viewed and downloaded around 15 million-plus times since its launch and the reach is around 100 million-plus if partners and devices through which these shows are being watched are included, according to Manav Sethi, chief marketing officer at ALTBalaji. The Balaji-backed company claims over 4 million paid users. Star India’s OTT platform Hotstar has also grown in stature since its launch in 2015. It recently crossed 100 million downloads on Google Play Store and is seen as a pioneer in leading the home-grown OTT brands in India.

Hotstar’s peers are not far behind. “SonyLIV has over 75 million app downloads and over 59 million MAUs (monthly active users). The average time spent on SonyLIV is 18 minutes. The next three-four years are going to be exciting and challenging as the next billion users will come from small towns and cities,” says Uday Sodhi, Executive Vice-president & Head, Digital Business, at Sony Pictures Networks India (SPN). Voot from the Viacom stable has around 25 million monthly active users as per IDFC.

“We have a lot of work and a lot of opportunity ahead,” said Reed Hastings, CEO, Netflix, who was in India earlier this year, conceding that Netflix was way behind YouTube and Hotstar. “The Indian entertainment business will be much larger over the next 20 years because of investment in pay services like Netflix and others,” he said.

Business model realities
One of the biggest challenges for the digital space in any form has been in monetisation. The fact that the conversation is already here in that context for OTT is a significant green flag for OTT players.

“The Indian OTT space has spectacularly over-delivered in terms of audiences, consumption and content for sure. On the revenue front, advertising is moving in the right direction albeit from a small base, while branded content and syndication continue to see a positive surge. As far as subscription goes, it is still early days, but tectonic moves by large platforms and telcos and payment enablers could quickly change this. Net, the tailwinds for a full play media company are very much in place,” comments Arré Founder, Sai Kumar, who had begun the Arré journey to be a full-play media company focused on creating a world-class media product with revenues from advertising, syndication, branded content and subscription.

Hotstar, unlike Netflix and Amazon, can be freely accessed by consumers as nearly 80 percent of its catalog is available for no charge. Only the premium offering is charged at Rs 199 (roughly $3) per month. Whereas the cheapest monthly plan by Netflix in India costs Rs 500 ($7.6) and the costliest is Rs 800 per month ($12.3). Amazon, on its part, has been very aggressive with the pricing of Prime membership in India. The service that costs $119 a year in the US, costs Rs 129 ($1.90) a month or Rs 999 ($14.50) a year in India. It includes access to Prime Video, Prime Music and faster delivery for packages.

Gaurav Gandhi of Amazon Prime Video says, “We believe streaming can do for TV, what multiplexes did for films. We want to create a large market for ‘targeted’ premium entertainment.”Data shows that audiences in India will pay for content even as it may be more of a volume game and average revenue per user — a factor that plays in favour of broadcast-backed OTT players that already have significant quality content to add to their offerings. What is more important is that brands that were born in India, including from the international stables, did not rest on library content and continued their experiments and content innovations.
Changing content paradigm
While access to global and local scripted and unscripted content including web-series, films, TV shows, stand-up comedy, documentaries is now only a click away thanks to the OTT apps, a strong loyalty to pay TV platforms such as DTH and digital cable still dominates viewership in India unlike in China, Australia, Japan, US, UK and some European countries where OTT players are emerging as the dominant force. OTT players in India are, however, striving hard to dominate the viewership pie and also generate revenue via subscription-led video on demand (VoD) and advertising-led VoD, broadly the two business models that work for streaming business.
There is a third model in play too. Cashing on the OTT boom is LiveMe, the Chinese live broadcasting video chat app from the Cheetah Mobile stable that entered India in February 2017. It has 60 million subscribers across the world and 13 million from India, says Johnny Wu, Regional Director for the Indian and European market. LiveMe, unlike other streaming platforms, is happy with its customer base, largely on smartphones.

“We are expecting to reach more than 100 million Indians from our app LiveMe in five years from now,” says Wu. Its business model is quite different from other OTT players because they do not charge their subscribers. “LiveMe fans can send virtual gifts (such as lollipops, diyas, etc.) to their favourite content creators and creators can encash these virtual gifts in the real world using their credit and debit cards. We take a little premium from these digital transactions,”he adds.
In India, these are early days for OTT platforms. In next three to five years, will these OTT players and streaming VoD make any dent on pay TV platforms? “Not really,” says Thakkar. “‘Cord cutting’ in India is rare and in the medium term, will continue to be rare. Consumers will continue to access and use both services as the cost of television in India remains dramatically low compared to most other countries and streaming services to remain largely free or at a very low cost,” he adds.  

Steadily growing
While nearly 80 percent of OTT content consumption today is on hand-held devices such as mobile phones and tablets, Gaurav Gandhi, Director & Head of Business at Amazon Prime Video India, is seeing an emergence of ‘living-room’ consumption of the streaming services as well. “With affordable streaming devices such as Fire TV Stick, consumers can now enjoy high quality on-demand video on their TV sets. Over the next 24-36 months, there is likely to be a significant growth in fixed line broadband and that will further drive the consumption of streaming services on larger screens,” says Gandhi.

With time more players will be entering the OTT business offering engaging and compelling content. Reliance Industries has already announced expansion of JioGigaFiber, the optic fiber broadband service by Reliance Jio. Announced at RIL’s 41st Annual General Meeting, JioGigaFiber will be much more than plain vanilla broadband connection. It will offer Ultra HD entertainment on your large screen TV by connecting the GigaTV set-top box to your large screen TV offering curated content. Eros, Voot, Viu, and several more apps will also be upping their content offerings. Currently, a quality web-series costs Rs 50 lakh per episode. With more mainstream actors, directors and film producers being engaged, OTT will see a 10x increase in content-led investments making viewers the ultimate winner.

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