October 26, 2018
The OTT video market in India has at least 30 major players currently, focussed on servicing a fast growing and increasingly subscription-led market that is moving online for its entertainment needs. This trend is expected to spur major innovations in content and also open up lucrative opportunities for content providers in the global sphere.
India's media and entertainment industry is driven by a huge domestic market with 168 million TV households, 99,700 newspapers, close to 2,000 multiplexes and close to 300 Million Internet users1. It is among the 12 champion services sectors identified by the Government of India for the purpose of promoting their development and helping them realise their potential.
As per ongoing trends, digital advertising is the largest growth driver of the industry with a CAGR of 30.2% compared to a range of 8-18% for the other segments by 20192. The over-the-top (OTT) video segment is a prime example of how digitisation is indeed making a transformative change in the overall M&E industry. This transformation is driven largely by rapidly improving mobile phone technology, rising penetration of smart devices like smart TVs, tablets, etc, faster and increasingly economical internet speeds, widespread internet access and consumer demand for diverse and original content. The rise of OTT is ushering in a transformation in the way Indians consume video content. Simultaneously, it is also precipitating a rapid increase in the number of OTT content platforms bringing diverse and rich content from across the world to the Indian consumers.
According to a report by KPMG in India titled Media Ecosystems, The walls fall down; online video audience is expected to reach around 550 million by 2023, as compared to 225 million in 20183. On the other hand, video OTT revenue is expected to grow to Rs 138.1 billion in 2023 as compared to just Rs 21.5 billion in 20184. Moreover, while advertising revenue will continue to dominate, its share of total revenues is expected to come down from 80% in 2018 to 67.5% by 20235, as the share of subscription-based revenues is expected to progressively increase.
The video OTT market in India now has at least 30 players from diverse domains - broadcasters, studios, DTH operators, telcos and content aggregators. Some of the notable ones include Airtel TV, Reliance Jio, Sony LIV, Zee, ALT Balaji, Netflix, Amazon Prime, Hotstar, Voot, Eros Now, etc.6 The Hotstar India Report 2018 pegs online video consumption growth at nearly five times in India in 2017, 3.5x for metros and 4.3x for towns with populations less than 10 lakh7. Interestingly one-third of Hotstar users are watching their favourite programmes on the mobile rather than on the TV8. The globalisation of content via the internet presents opportunities in the global market as well. On October 3, 2018, Zee announced that it was taking its OTT service ZEE5 to more than 190 countries, the first Indian company to do so.
While a majority of the content still continues to be catch-up TV (reruns of TV programmes with some content additions to engage viewers) via the Advertising Video on Demand (AVOD) model, the sheer diversity in platforms and intense competition is propelling players to also adopt the digital first model with original content. In this format, players leverage the Subscription Video on Demand (SVOD) model. India posted the third highest CAGR in SVOD revenues in 2017 according to a report by PwC9. Furthermore, subscription services accounted for 70% of total OTT revenue in 2017, a share that is likely to grow to 79.4% by 202210. Players like Netflix and Amazon Prime are tying up aggressively with leading production houses for original and exclusive content to cater to Indian audiences11. Reliance has taken stakes in a number of M&E companies like Balaji Telefilms, Saavn and Eros Now to strengthen its content offerings for its Jio subscribers. It also set up a Rs 1,000 crore fund with Eros International Media to acquire Indian films and digital originals. This trend is opening up huge opportunities for content providers in terms of digital revenue streams. For instance, digital/OTT revenue reached Rs 8.5 billion for the film segment in 2017, a growth of 40% year-on-year12.
The entertainment business in the age of smart devices is smart for a reason, OTT players have unprecedented access to real time data on the specific preferences in terms of programmes, engagement levels, audience profiles, etc that can help them plan their content, distribution and monetisation approach going forward. Some notable ways in which AI and machine learning is helping content producers today include planning the development of trailers and promos to achieve best possible engagement, updating best possible sports highlights/data, automatic meta tagging and subtitling of content, evaluating story options as well as ad targeting and scheduling. Brands are also leveraging programmatic advertising in a big way, which essentially involves ad buying through machines. It accounted for 10-15% of advertising revenue in 2017, which is expected to grow to more than 50% in 202013.
With the rise of OTT platforms, India is moving towards truly personalised, original content that can be accessed anytime and anywhere. The intense competition is also expected to spur innovation in content, while also generating new revenue streams and growth opportunities in the digital space for the media and entertainment industry.
6, 11, 12, 13 - http://ficci.in/spdocument/22949/FICCI-study1-frames-2018.pdf