Unraveling The Digital Video Consumer

Unraveling The Digital Video Consumer

Looking through the viewer lens

India’s online video market is potentially one of the most exciting markets and businesses in the world. It is estimated that India will have more than 500 million online video subscribers by FY 2023, and this would make it the second-biggest market in the world behind China alone.

In India, the internet video traffic is projected to reach 13.5 Exabytes (EB) per month by 2022, up from 1.5 EB per month in 2017; with video contributing 77 percent of all internet traffic by 2022. The largest gain in this rising consumption for the viewer is in terms of the options available of the kind of content to watch, depth of interactivity available on engagement with video, and many viewers spilling over the line to become creators.

As India witnesses the change in the definition of mass general entertainment, movies and sports are likely to be driver content and digital original series would likely be an important tool in defining this transition in culture. A déjà vu of what India saw in the early days of cable television, this universe is going to be divided into the bundled and the a-la-carte model, with telcos/internet service providers (ISP)/network partners, original equipment manufacturers (OEMs), broadcasters, movie studios, and tech aggregator platforms all playing a key role in the development of this universe of audiences. India will continue to be a challenging market in terms of audience pivots on language, content genres, access, and several million consumer cohorts to truly exploit the mid to long tail of online video.

A few of the opportunities to look forward to in this business from an India lens would be:

  • Quality Indian narratives traveling beyond the South Asian audiences around the world.
  • The true evolution of the technology stack in order to efficiently deliver content to different audience types, in different languages and genres.
  • Evolution in the business of Big Data, resulting in more qualitative viewing sessions and predictive viewer behavior. An ancillary but significant use case to also effect consumer purchase patterns across products and services.
  • Collaboration would be an important theme including cross-border and this would have different shapes and forms that we have not seen in the traditional media business.
  • Interactive video gets true meaning as now a viewer will not only watch the video but will also be able to feel the video.

There is a significant probability that in Tier-III+ markets in India, consumers would experience the internet for the first time with online video, hence making it a gateway tool for a true Digital India.

The online video landscape in India

The growing high-speed internet-user base in India has been the catalyst for online video viewer growth in India, which has reached a critical mass of more than 300 million users by FY19. They are forecast to reach 325 million in FY19 and 550 million in FY23.

And OTT players have shot up from 9 in 2012 to 30+ in 2018.

Monetization models prevalent in the Indian market

These above monetization models are distinct from telco-backed OTT platforms, such as Jio Cinema, Jio TV, Airtel TV, and the like, which are largely aggregators of content from other broadcasters and online video platforms, and provide bundled services to their subscribers with the cost of content packaged with the cost of data, voice, and text messages for each pre-paid or post-paid plan.

Distribution strategy and depth

OTT players across the board have been focusing on developing a robust distribution strategy to have a widespread presence across their target audiences and across various device ecosystems. Thus, alliances with telecom operators, cable TV/DTH operators, original equipment manufacturers (OEMs), and others are being actively forged to ensure an optimum distribution depth.

Understanding the Indian SVOD subscriber

SVOD subscribers are deeply engaged with online video apps

As consumption of video content continues to gain traction, subscriptions on online video platforms have also started to pick up over the last 12 to 18 months. As per the FICCI-Eros Now survey, a substantial 44 percent of the respondents were paying for online video content. That these are still early days for the online video market was evident in the survey results, with SVOD subscribers using about 2.7 online video apps on an average but paying only for one of those apps in a universe comprising more than 30 players, thereby leaving a lot of room for growth in terms of subscription revenues. Compared to the SVOD subscribers, AVOD users were found to use only 2.2 online video apps on an average, which suggests that SVOD subscribers are more deeply engaged with video platforms and tend to explore both free and paid platforms for their entertainment needs.

Subscription translates to higher video consumption

SVOD platforms, as per their value proposition and target customers, have diverse content offerings ranging from live sports, digital movie premieres, and original shows to exclusives for their paying subscribers. In order to keep their existing customers engaged and attract new subscribers, SVOD players in the country have been consistently trying to add fresh and exclusive content on their platforms over the past few months, with platform capabilities empowering offline viewing (through downloads of premium video content) as well as multi-screen consumption.

This focus on innovation through fresh content and better user experience seems to be translating into higher consumption for SVOD users as suggested by the results from the survey.

While frequency of consumption for SVOD subscribers was found to be only marginally higher compared to AVOD users, more than 61 percent of the SVOD respondents surveyed watched video content more than once a day.

In addition, session durations for SVOD subscribers were found to be 43.3 minutes on an average, nearly 17 percent more than that witnessed in AVOD users, suggesting that SVOD subscribers may have a penchant for long-form content. This was corroborated by survey results pointing out that nearly 37 percent of SVOD subscribers had average session duration of more than 45 minutes compared to only 25 percent of AVOD users falling in the same consumption bucket. These findings suggest that the consumer mindset to maximize value for money, coupled with access to premium content (ad free or otherwise in case of live sports) in a timely and non-linear fashion, are key reasons driving more frequent and higher video consumption in paid subscribers.

Preference for sports and non-linear viewing stands out among SVOD subscribers

While content category preferences among SVOD subscribers are similar to those of AVOD users, higher inclination toward sports stands out among the former.

With movies remaining the most popular content category across both SVOD and AVOD groups, 21 percent of the SVOD subscribers surveyed preferred sports content against just 12 percent in the case of AVOD users. Popular OTT platforms that have digital rights to popular sports properties have tried to exploit this penchant for sports and create suitable monetization strategies with the availability of live sports placed at the heart of it.

To provide a seamless viewing experience, many online platforms allow users to watch content over multiple sessions without needing to remember where the earlier session ended. This capability coupled with the ability to watch offline (downloading of premium content is permitted on most paid subscriptions) has changed the way SVOD users watch movies. The survey results revealed that a majority of SVOD subscribers, who prefer watching movies, consume it over multiple sessions with two sessions being the most common choice.

77 percent of SVOD subscribers consume content through direct subscriptions

While telcos have played a key role in empowering online video platforms with reach to a wide user base, the survey results pointed out that direct usage of the specific online video platform was preferred by SVOD respondents as compared to AVOD ones. As SVOD platforms that are also present on telco apps tend to reserve select content offerings and experience-related features (like ability to download) to their own app, SVOD users who can access similar/same content on both the telco and OTT platform app are likely to prefer direct consumption.

Ad-free viewing and cash payments are important for SVOD users

Originals, besides becoming a buzz word in the video content industry, have attracted new audiences with their fresh and, at times, uninhibited appeal to story-telling.

However, factors like an ad-free viewing experience and content quality are extremely critical when it comes to offerings for paying subscribers. The importance of these was highlighted in the survey results as the top drivers of subscription were observed to be an ad-free viewing experienc’ and better content quality on paid platforms, chosen by nearly 43 percent and 37 percent of the SVOD respondents, respectively. This trend in the Indian video market, which is still to mature in terms of monetization, appears to hint that video platforms getting their basics right are likely to garner a large share of the subscription market.

90 percent of the SVOD respondents subscribe through cash

Most online video platforms that have a subscription offering in India permit payments only through the online medium. Among the notable exceptions to this trend are Hotstar and Hoichoi with their CoD (cash on delivery) and recharge card model respectively. While video platforms across the board have tapped into partnerships, especially with telcos, partnerships enabling cash payments are conspicuous by their absence.

In contrast to expectations, this does not seem to have stopped people from subscribing through cash payments with nearly 19 percent of the SVOD respondents surveyed paying for their online video services through cash. Adoption of an inclusive subscription strategy that enables cash payments and addresses leakages happening through middlemen acting on their own to exploit the gap in payment options may further propel subscription growth for SVOD platforms operating in India.

Consumer pricing of major SVOD platforms

Given the fact that there is a fast-emerging base of mass consumers with access to digital infrastructure, who are increasingly consuming content online, OTT platforms which appeal to a wide set of digital mainstream consumers with content in their languages, are likely to see traction in terms of subscription businesses going ahead. Further, with the price-sensitive Indian consumer already habituated to low subscription prices with the monthly cable and satellite (C&S) ARPUs ranging between Rs. 220 and 250, the sweet spot for OTT subscription could be in the range of Rs. 40 to 100, given the increasing propensity of consumer to access content on more than one platform, as outlined earlier in the survey.

Is Cord cutting imminent?

Entertainment needs of more than 80 percent respondents are fully met online!

The masses are beginning to recognize that online video can be a primary means to meet their entertainment needs. More than 80 percent of the respondents across different city tiers and income brackets were able to fulfill their entertainment needs completely through online videos. The ubiquitous access of online videos along with diversity of content available could be the primary drivers behind such assertions made by the respondents.

People are starting to seriously consider cord cutting as an option

Of the respondents, who fulfill their entertainment needs completely through online videos, nearly 38 percent mentioned about being open to cord cutting. While the intent to cut the cord may not actually translate into doing so eventually, more than a third of the respondents willing to actively consider it outlines the rapid growth that digital video has made, and the threat that traditional video distribution could face in the long run.

The data set for potential cord cutters, when analyzed across city tiers, income brackets and age groups, revealed the following:

The quality of content available on online video platforms and the freedom of anytime, anywhere viewing were the primary drivers of the intent behind cord cutting by a majority of the respondents, at 39 percent and 24 percent respectively. The same outlines the impact that a fresh approach to content and storytelling, can make on the viewers across the board.

The content category preferences, when analyzed for the potential cord cutters and non-cord cutters, revealed that for the cord cutters, movies and television content (catch up) were of primary importance, with the preference of originals being surprisingly lower than the non-cord cutters. This outlines the fact that the potential cord cutters are probably not digital natives, but consumers who could look to online video for the ease it provides, while still remaining true to their traditional video choices. However, the lower preference of online originals amongst cord cutters could also be a function of the relatively low supply that originals suffer from currently in the market. Based on the KPMG-EROS NOW report.

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