The past decade has seen a global transformation in how consumers watch videos. From the days of terrestrial broadcast, social viewing of television to highly personalized, small screen consumption – the media industry is witnessing a transformation like no other. The rate of change in the industry only continues to accelerate, with hyper-competitive dynamics coming into play in India. There are the traditional players, and a strong push from global and more nimble companies to get into the OTT space. At the same time, India’s appetite for entertainment continues to increase as high speed broadband connectivity, ease of payment options, and availability of multiple platforms creates the right environment for the consumers.
In the last few years, OTT content has seen substantial prevalence when compared to conventional forms of video consumption. Revenues from OTT content has seen a CAGR of 40 percent+ for the period 2005–2017 and is expected to see a growth of 20 percent in the period 2017–2023. In comparison, public TV, FTA TV, and pay-TV have seen a growth of 2 percent, 1 percent, and 6 percent, respectively, in the period 2005–2017.
The Indian OTT phenomenon
The market for OTT content is poised to reach `34000 crore (USD 5 billion) in India by 2023, from `3400 crore (USD 0.5 billion) in 2018. This revenue growth is being driven by rising affluence, increase in penetration of data into rural markets, and adoption across demographic segments including women and older generations. The majority of India has a single TV per household. Affordable data has created an alternate medium where consumers, for the first time, can tap into content, basis individual preference, at a time and space convenient for them. Whilst the current market operates with a largely advertising paid content paradigm, consumers are not averse to paying for convenient content access that OTT unlocks. 48 percent of India’s internet users (~650 million by 2023) are expected to be from rural areas. With the development of regional content by various players, the rural market is poised to become a significantly large opportunity for players. OTT is riding the wave of increased data consumption and internet access in rural India which has opened a new distribution channel that is viable for regional and niche content.
A key barrier for OTT players is the awareness of the apps among consumers. While the overall awareness for AVoD apps among consumers is 80 percent, the awareness for SVoD apps is only 54 percent. However, the awareness to trail/purchase is similar at 50 percent. This indicates that SVoD penetration still requires a much higher marketing effort to build awareness and a differentiated proposition in the mind of the consumer. The low awareness of apps among consumers poses a significant hurdle. The benefit of investing in content for relevant markets will not be realized if the content does not reach the consumer. There is a significant need to increase awareness of the OTT apps and content offerings. Overcoming the awareness barrier will be key in realizing the USD 5 billion opportunity of the Indian OTT market.
The Indian OTT space is hyper competitive and has attracted varying types of players which offer varied value propositions to the consumers and have different business models. There are multiple business models evolving in India. All large successful broadcasters in India have launched their own OTT platforms, for example Hotstar, Voot, Sony Liv, and Zee 5. These broadcasters have put their extensive TV content libraries online, supplemented by additional content through licensing and originals. In India, these players enjoy a strong brand and consumer awareness driven by their strong TV brands. These OTTs have a combination of ad supported and behind the paywall content. This is unique to India – as broadcasters were quick-off-the-block in the OTT space and are hence, well entrenched.
Global OTTs e.g. Netflix, YouTube, Amazon Prime have extended their services into India. Historically, India developed a video watching habit with YouTube. The global OTTs (e.g. Netflix, Amazon Prime) have started investing in local Indian content in a significant way. Investment for original content by OTT players is increasing at a fast clip. In addition to live sports rights, the nature of shows produced is also evolving – tent pole properties built for OTT are at a cost per hour of 3-4x cost of traditional TV content. The need to differentiate to attract eyeballs is enabling aggressive bets on original content. The big story in this market is Netflix’s first Indian digital original series, Sacred Games. Not only is Sacred Games the most in-demand of the Indian digital originals, it is the most in-demand of all digital originals in 3Q, with over twice the average demand as the second placed 13 Reasons Why. Netflix’s second Indian digital original Ghoul also performed strongly, becoming the 11th most in-demand original despite not being released until halfway through 3Q. The Indian market was also well served by Amazon Prime Video’s Indian digital original titles like Comicstaan, Inside Edge, and Breathe. These series are all in the top 30 digital original series in the market, with Comicstaan the highest at 19th most in-demand.
In addition, the telcos, for example, Airtel, Jio and Vodafone-Idea are building aggregator models – aggregating content across multiple platforms and providing a payment interface. They are also leveraging access to other OTTs as a differentiating factor to drive consumer retention and acquisition. Independent OTTs are also evolving, being supported by content creators. Social media platforms continue to be an important source of video consumption, and social media players are leveraging this by increasing their focus on video content.
Traditional TV distributors (cable, DTH) are also experimenting with different models to participate in the digital media space. Most of these players and models have evolved and entered the market in the past 5 years. The year 2017 saw the first burst of big money being deployed behind Indian content on OTT. Heavy investments are now underway across multiple players. The numbers of players in the Indian OTT market have witnessed a 3.5x increase in the last 6 years growing from just nine players in 2012 to 32 in 2018.
Global market scenario
The global OTT opportunity is huge and has been pegged at ~USD 76 billion for 2018. Such a large canvas allows both SVoD and AVoD models to not only coexist but also thrive. The United States and Canada dominate the OTT market due to better connectivity which allows for wider circulation of OTT apps. Their continued dominance in the market can be credited to factors such as the availability of high-speed connectivity, the presence of established content creators and providers in the region and the significantly higher costs associated with more traditional modes of media consumption (like pay-TV) which has made OTT into a more cost-effective solution.
Race to be among the top 3 video apps
Most consumers (81 percent) have up to 3 video/OTT apps on their smartphone. Further, all platforms struggle with retention of consumers – on an average 50 percent of OTT apps installed are uninstalled in the first 7 days of installation. The competition for user share is intense – every OTT platform is vying to be among the top 3 of the consumer’s attention. The way in which an SVoD platform releases new episodes of its digital original series affects how the demand for these titles develop.
Netflix pioneered the all-at-once method, where all episodes are released on a single day. This release method helped popularize binge-watching as viewers did not have to wait a week to watch the next episode; however, it has the side-effect of having demand for the show decline immediately after release. There is often a slight increase in demand during the second weekend after release as more people finish the season, but generally demand for shows plateau in about 1 month. In contrast, the episodic release schedule maintains demand throughout the season as people keep returning each week, but its premiere demand may not be as high because only one episode is available.
Outlook – OTT driving innovation
Personalized content. The concept of personalized content is relatively new in India. However, OTT is set to change all that, and that is already happening. Netflix, Apple Music, Amazon Prime, and other OTT-based services have begun to offer personalized content to a market that was mostly used to the hand-me-down equivalent in media content. Personalization spurred by OTT will likely have cultural and social ramifications but in a positive manner. Indian media consumption has been dominated by proscriptive relaying of content without much choice for the actual viewer or consumer. OTT will change that and help Indian users to choose what they want, and watch they will most likely want to watch or listen. Newer players will make use of data insight to change algorithms and develop apps and media content that will actually appeal to individual users. In other words, OTT will help propel the process of individualization of Indian entertainment and media consumption.
Streaming of video and audio. More than 70 percent of revenue earned by the Indian music industry now comes from digital streaming. Affordable and high-speed internet connections have helped the music industry to make use of online platforms to offer music as OTT. Similarly, Indian movies and TV shows have a huge potential to reach the market via OTT. Most people in India have begun to replace their televisions with smartphones for media consumption. As smartphones usage tends to be an individual affair, as opposed to a family watching TV, individualization, and personalization of music and movies will grow. There is a potential market for larger screen smartphones in India. Innovation in device manufacturing and accessories is an area that manufacturers and distributors are looking at. Accessories such as smart headphones, artificial intelligence, and IoT-based media consumption devices, among others have a promising future in India, thanks to OTT.
Content in various languages of India. Right from sports, music, and movies to online gaming, content in regional languages is likely to be the focus of media houses, whether national or international. SonyLIV, for instance, believes that a large proportion of its OTT offering will depend on media consumption in languages other than English, such as Tamil, Bengali, and Kannada. In fact, Sony has plans to attract 200 million users from various linguistic states of India, subverting the idea of homogeneous media consumption. While music and movies already have an OTT presence for various languages of India, OTT-based TV services hold promising opportunities as well. Innovation in this area will focus on making TV-streaming in regional content quicker and more accessible. Mobile app streaming via OTT is another area that might open doors to innovation.
Improvement in digital infrastructure. While OTT is likely to open doors to a lot of content creators, broadcasters, and aggregators, it is also going to open up opportunities for people working toward improving digital infrastructure. OTT will propel software and web development opportunities, while also helping digital marketing agencies to take up new projects. Existing digital infrastructure in India is rather dismal, even if high-speed 4G, the upcoming 5G, and broadband connections in urban areas are considered. While Indian languages offer bountiful opportunities for innovation, currently there are issues with keyboards, fonts, and language input. Innovation in the field of improving user-experience for content in Indian languages is very important. Low data speeds are still a challenge, and OTT usage will force telecom operators and service providers to improve existing infrastructure and enhance speeds.
Enhanced user-generated content. With smartphone usage is expected to explode, there are a lot of opportunities in the field of user-generated content. Much of the OTT-enabled services will likely see innovation in the area of helping people create and share content in the language of their choice. Innovation will revolve around building applications that are user-friendly in terms of content creation and sharing. With this in mind, video and music editing applications may prove to be important areas to consider.
Indians’ appetite for watching online videos is set to make the country among the top 10 OTT video markets in the world in 4 years, with major OTT players pushing deeper into people’s living rooms. With the Indian economy surging forward at a rapid pace, consumers’ personal and professional lives are getting busier, travel is getting longer and technology is becoming simpler. There is a shift in the way people are watching movies and TV shows; especially supplemented by improvements in streaming infrastructure. Exclusive, original programming and live content will give an edge to some platforms that can afford to offer such services. Platforms with vernacular options will strike a chord with the masses, capturing audiences beyond urban areas. The market is just waking up to the subscription video-on-demand proposition, and it will have more takers in the next 5 years.