- What drove the instant popularity of OTT platforms in India in recent years?
- Will online content be able to substitute television as the primary source of entertainment in India?
The last few years have been revolutionary for the Indian Media and Entertainment (M&E) industry as it underwent a structural change, particularly in terms of media consumption, which shifted from traditional sources (TV and cinema) to over-the-top (OTT) services. The overall M&E industry grew by ~13% each year in 2017 and 2018 to reach INR 1.67 trillion. In these years, digital media sector grew by ~30% and 42% to reach INR 169 billion. This growth has led to a significant increase in the share of digital media in the overall M&E industry, up from 7% (2016) to 12% (2018).
In the digital space, Video-on-Demand (VoD) has become increasingly popular in the past few years. VoD refers to streaming of content over the internet, through applications known as OTT platforms. OTT has primarily disrupted the whole process of how content is consumed nowadays. These platforms enable content viewing at one’s convenience in terms of time, place and device, this is in contrast to scheduled programmes aired on television.
VoD services are categorized based on their monetisation methods, viz.
SVoD - Subscription based (example; Amazon Prime and Netflix)
TVoD - Transaction based (example; iTunes)
AVoD – Advertising based (example; YouTube)
In India (a price sensitive country), AVoD is a more prevalent category as it offers free content to viewers. Further, as per a report published in December 2018, around 82% of viewers watch free content on AVoD platforms, while only 18% pay for the content through SVoDs.
This digital revolution has been primarily driven by increased mobile penetration, ceaseless connectivity and availability of the new-age and relatable content.
Mobile and internet penetration: India witnessed a growth of 6% (CAGR) and 28% (CAGR) in mobile and internet users, respectively from 2016 to 2018. This increased the overall mobile penetration to 60% and internet penetration to 44% in the country. In 2018 alone, the number of internet users grew by 18% (annual) to reach ~566 million, which reflected an overall 44% internet penetration. Out of this, 566 million, 44% was from rural India, which grew by a whopping 35% (in 2018). The remaining 315 million were in urban India, which witnessed a growth of 7% (in 2018).
Ceaseless connectivity at low cost: driven by intense competition among data providers in the country, the internet is now available at affordable rates. This is in complete contrast to the extremely high rates that users paid up to 2016-17. The rates have reduced from as high as INR 1,500 per month for 2G and 3G services to INR 500 per month as of now, which includes voice calls and 1 GB data per day for 4G services. This is due to a result of the strong competition triggered by Reliance, which introduced its 4G services called Jio in 2015. In order to compete with Jio and to remain in the market, other players were forced to follow the suit and reduced their tariffs. Currently, India has the lowest internet data tariffs in the world.
In terms of the internet speed, India stands at 111th position in the mobile data category globally. Nonetheless, the country has come a long way in a rather short span of time. In 2018, mobile internet speed improved by 15.2% (year-on-year growth).
Content: easy access to the internet at low tariffs has indeed made VoD a rage, however, the content of shows/movies is the key driver for its popularity and demand, especially in a diversified market such as India.
With the advent of VoD services, Indian viewers are moving away from daily soaps and repeat movies which are aired on scheduled times on TV to Indian and international hit shows, movies, documentaries and originally created content available online. Hotstar (February 2015) and Netflix (January 2017) were the first ones to introduce this digital world to the Indian audiences. Nonetheless, this trend picked up its full pace in late 2017 and early 2018 when multiple Indian, as well as international platforms such as Voot, Amazon Prime, Altbalaji, Zee5, SonyLIV entered the market. Many Indian versions have been launched by the mainstream/big banner Indian TV channels and production houses.
Netflix’s Sacred Games which was launched in mid-2018 is considered to be the game changer for this industry as it prompted various production houses to invest heavily in content. Since then, many big banners have launched shows like Mirzapur, Breathe and Inside Edge to which viewers gave a big thumbs-up. The need to provide relevant and intriguing content to the local audience has been recognised by international players as well. They have tailor-made their content portfolio to better suit the Indian preferences, be it in terms of language, regional content or more niche, new-age and relatable stories.
Sports is another category where viewers are shifting from traditional television broadcast to the online live telecast. HotStar, which has exclusive digital rights for the ICC Cricket, IPL and Wimbledon broke the world record in terms of the number of people concurrently viewing online live telecast for IPL 2018 finals.
OTT platforms have introduced new-age content for the Indian audiences, which desperately needed a deviation from the monotonous content that was running on television for years now. The acceptance of this innovative content, in turn, encouraged content creators as well as OTT service providers to step out of the conventional stories and storytelling methods. The content creators are now experimenting with innovative ideas that are also relatable as the audience seems to be mature enough to accept the change.
Another factor that worked out well and is expected to work even better for the Indian audiences is the regional content both the English and Hindi content in the local languages and regional stories.
Globally, the VoD trend has introduced a concept called ‘Cord Cutting’, the practice of cancelling or forgoing a pay television subscription for an alternative internet-based or wireless service. In recent years, a huge number of online viewers across the world have cut the cord of their cable and satellite television and have switched to the online platforms. Fortunately, this concept has not picked-up in India. Instead, the television industry grew by 11% and 12% Y-o-Y in 2017 and 2018, respectively and still constitutes more than 40% of the total M&E industry. This is because the digital platform has become an additional screen in India, but has not really displaced the TV sets yet. Additionally, TV is expected to continue to be the primary screen for entertainment in India (at least in the near future) because (1) watching TV is a part of the daily family routine in Indian households, (2) OTT has not become a big trend in rural India as it is in urban India.
Nonetheless, the introduction of OTT platforms has been one of the most welcomed trends in the history of India’s M&E industry. According to a PwC report, India is expected to be in the top 10 global OTT video markets by 2022.
In India, unlike in more mature countries (such as the United States), television and OTT are expected to grow together as both caters to different segments of the market at present. Star India president, Gaurav Banerjee said in a recent FICCI frames 2019 discussion that ‘the advent of VCR did not kill theatres. The Walkman did not kill radio. Streaming services will not kill TV.’ Raj Nayak, the former Viacom 18 COO also acknowledged this in the same event, ‘I am a big believer that television is here to stay. For families in small towns in the evening, the television comes on. It is a habit-forming thing. Simultaneously, digital streaming is happening, but a lot of people still watch this on the big screen’.
However, content providers on television need to reinvent themselves in order to stay in the market and compete with OTT players.
In a nutshell, both OTT and TV will grow together as TV still remains the primary source of entertainment for Indian households and OTT acts as an additional source of entertainment given it offers new-age content and is accessible anytime, anywhere. While the Indian television industry is expected to grow by 10.6% (CAGR) from $13.3 billion in 2017 to $22 billion in 2022, the OTT market is forecasted to grow by 22.6% (CAGR) during the same period. Hence, the Indian audiences now have access to a plethora of entertainment options, which are expected to grow multifold in the near future.