Even as Netflix and Amazon’s revenues have grown over 30 percent, their debts have grown by 50 percent and more over 2014-18. Apple, Comcast and Disney did much better, with low debt levels and high growth of free cash flow. These were among other insights on the economics of streaming video from the US, China and India shared by Vivek Couto, executive director, Media Partners Asia (MPA), with Vanita Kohli-Khandekar. The Singapore-based MPA researches for and consults with some of the biggest media firms across the Asia-Pacific region and in the US. Edited excerpts:
Key insights from MPA’s research?
One, cheap debt and investors focused on growth-based valuations as opposed to profitability has driven the rise of Netflix and, to some extent, Amazon.
Two, YouTube and the potential future Facebook are the biggest disruptive influences in APAC (Asia-Pacific). Neither is aligned to a direct value-accretive content business model. Both are tied to two firms that have an enormous scale in Asia today (ex-China) and control an ad spend pie that is far bigger than the consumer subscription pie for video. YouTube has driven engagement in markets and is grabbing a lion’s share of ad dollars away from local TV. In India, to some extent Korea and Australia, key local TV players have gone online and wrested back some share, with India probably the most material to date.
Three, Netflix and Amazon are investing a significant amount in local premium and mass content, especially Amazon in India. Apart from Zee, the only other player that’s done that has been Star, led by 21st Century Fox. Now, as it becomes part of Disney, it will be interesting to see how it extends that mandate into other parts of Asia as it goes D2C (direct-to-consumer) in key Asian markets and tries to grab a larger share of the advertising market.
Four, technology and storytelling are important. Local IP (intellectual property) and depth is critical and provides a deep connect for audiences. Engineering the consumer experience of the content is also critical and that’s why FANG (Facebook, Amazon, Netflix, Google) has a competitive advantage, while players like Hotstar have invested in tech and research & development.
Advice for Indian OTT players?
OTT or internet TV is a distribution means, just like TV. The key is storytelling and IP; how it translates across online for consumers and advertisers — in entertainment, sports and the tech that drives it and provides the platform for great consumer experience.
Scalability across all of these buckets really helps drive stickiness and engagement and time spent, the real levers of long-term business and not simply short-term valuations.―Business Standard