The entry of global players like Netflix is disrupting the OTT (over-the-top) digital content ecosystem. But is India ready for sophisticated action in this space?
The Indian digital space has largely been governed by YouTube thus far and unlike other developed countries where digital commands a major share of viewership, the space is still very small in India. Having said that, the mindset of audiences is increasingly seeing a shift from ‘what is on TV’ to ‘what do I feel like watching on digital’. Infrastructure changes, with a promise of 4G and improved bandwidth speeds, are only making the OTT space a business for everyone to look at.
OTT, defined as video, television and other services provided over the Internet rather than through traditional service providers, has witnessed the entry of several new players over the past few years, the most recent entrant being global giant Netflix. The company became the talk of the town over its sudden entry and its ‘highly priced’ subscription packs. But a lot more needs to be done. A Netflix spokesperson says, “We need to acquire rights for TV shows and movies in individual markets, localise services, ensure we can move video data around the world seamlessly to meet demand, establish a plan for customer service and establish clear methods for payments.”
As things stand, India’s online ecosystem remains devoid of the necessary infrastructure, coupled with dismal broadband speeds. Payment wallets for subscription services are just beginning to see the light of day. While the US is a subscription-driven market and China follows an advertising-led model in the OTT space, India is still struggling to come up with a viable business model that enables returns. What, then, is attracting broadcast networks, content companies and even big overseas players like Netflix to India? Is the market mature enough to satiate the appetite of all players?
To pay or not to pay
Presently, there seems to be a very small ratio of pay subscribers. “One report states that there are 25 million OTT subscribers in the market today, of which pay subscribers would be less than 5%,” says Sony Pictures Networks India EVP and head of digital business Uday Sodhi.
Platforms are targeting early adopters, typically younger audiences who are willing to experiment and have high spending power. If one looks at the consumption pattern presently, over 70% would fall in the age group of 20-35 years.
Although the young target group possesses disposable income making it the perfect monetisation target for OTT services, Uday Reddy, founder and CEO YuppTV says that you cannot provide premium content for free, but you also cannot charge a high premium because OTT platforms are more like a complementary service today.
Moreover, the price-point referencing for any subscription OTT service is of cable TV and these subscription video on demand (SVoD) price-points don’t seem very attractive for the mass market presently. One has to also keep in mind that a majority of the VoD consumption is happening on mobile and consumers are already paying for high data charges and therefore, it is a challenge if content is also priced high.
As a result, OTT platforms like Sony LIV, NexGTV, Hotstar, Ditto TV, ErosNow, Netflix and the upcoming VOOT and ALT, are now focussing more on developing original content as compared to just providing catch-up content.
People love TV content and still watch over a billion hours of linear TV eachday. What they don’t love is being required to watch shows at a certain time on certain devices.
There is a large audience on the net who is used to payment mechanisms which will enable platforms to drive consumption for their products. The basic plot is putting exclusive volume on and then testing the price-point.
“It is important for the VoD players to ensure that they build a robust library of local content, besides providing international content to the viewers, at an affordable price-point,” explains Nachiket Pantvaidya, CEO, ALT Digital Media Entertainment. “It will be interesting to see how OTT players stock up their local library while maintaining equilibrium between quality and price.”
The quest for sustainability
There are many challenges that OTT players will have to tackle if they are to survive. Gaurav Gandhi, COO, Viacom18 Digital Ventures, says there is a robust growth in video consumers being seen with over 80 million users already streaming video and around 85% of internet consumption being done through mobile devices.
“With a majority of Indian homes being single TV households, mobile devices have become personal video screens for everyone. The challenge for a lot of players will be sustainability,” says Gandhi. One needs to create a quality product, find the right monetisation model, take on the challenge of creating/aggregating differentiated engaging content, bear the cost of marketing the service and manage technology and streaming costs. “It’s a tough business,” he adds.
Moreover, there are only a handful of major players in the market presently which signifies the need for more platforms to come in and grow the ecosystem. Because the entertainment market is so broad, multiple brands can be successful.
“Many people will subscribe to several services (including Netflix) since we have different, exclusive content. The transition to internet TV, with its greater consumer satisfaction, will mean growth for many internet TV services,” the Netflix spokesperson says. Given the low cost of cable subscription in India, can OTT video players put a compelling cost benefit proposition for mass adoption? Many DTH (Direct to Home) players like Tata Sky, Dish TV and Videocon d2h are also giving competition to OTT platforms by launching their own mobile TV services or other unique content offerings. NexGTV COO Abhesh Verma states, “Competition is always good from the consumer perspective as they get more variety. However, all of us will be vying for the same eyeballs.”
Industry experts believe that no player has yet found the magic formula for monetising free OTT services. But there is hope; India has a bright future for online video services driven by the growth of connected devices, large internet enabled mobile user-bases, increasing internet penetration and growing consumer appetite for on-demand content services.
Beyond Indian shores
India is a unique market and many experts believe that comparing the Western market with India on video consumption would be unfair. “While the West moved from desktop to mobile, India has predominantly been mobile and will continue to be so,” says Milind Pathak, chief operating officer, Madhouse.
Also, in the Western OTT markets, digital video life cycles have evolved in a way that creating, consuming and paying for high quality digital video content is already a big trend. Indian OTT is only just picking up with the original digital content being produced. The Indian OTT market is still primarily driven by premium movies, live channels, quality short webisodes, cricketing events etc.
However, the geographical expansion of large OTT video portals such as Netflix and HOOQ is an endorsement of the fact that India is ripe for multi-screen streaming options. “Netflix’s entry will change the Indian market where people will have legal access to premium exclusive content across multiple digital screens,” says Dave Maan, EVP—video solutions, TO THE NEW Digital. This will eventually benefit the existing OTT players by bringing more premium digital content that can be monetised at higher price-points within the SVoD model.
“Though ours is a price sensitive market, Indian consumers will go with the players which not only suit their taste but at the same time offer value for money,” highlights Jyoti Deshpande, group CEO, Eros International.
Survival of the fittest
SVoD has been a very successful business model adopted in developed markets by players such as Netflix and Hulu. It allows for a digital access to the full library of the platform’s video content for a monthly subscription fee. When it comes to live streaming of sporting events, ‘pay per view’ has proven to be successful. These are strong revenue generating models which enable VoD players to recover the licensing cost of distributing the content.
On the other hand, VoD players in India have adopted advertisement-backed and subscription-based revenue models. Ad rates for VoD are one-tenth of that of live television. Hence, recovering costs for licensed content becomes a challenge.
Subscription-based models, on the other hand, have had limited success on account of viewer unwillingness to pay. This indicates the move towards a more freemium-type model, with premium content on subscription and free content on ad-funded models. VuClip has been practicing this model. “This enables us to gain viewers,” says Arun Prakash, COO, VuClip.
Even with better 4G internet speeds, affordable data packs and increase in smartphone penetration, OTT players who create exclusive original content that plays seamlessly on all four screens (smartphones, tablets, laptops and televisions), with high quality streaming options (like HD and ultra HD) and all at the right price-point, will be the winners of tomorrow.
With many homes in the country being single TV households, mobile devices have now become personal videoscreens for everyone. The challenge however for a lot of players in this sector will be sustainability.
COO, Viacom18 Digital Ventures
Though the market in our country is a very price sensitive one, the Indian consumer will only choose to go with the players in this sector which not only suit her taste but at the same time offers her value for money
Group CEO, Eros International
It is important for the VoD players to ensure they build a robust library of local content, besides providing international content to viewers, at an affordable price-point
CEO, ALT Digital Media Entertainment