Except for the fact that every one of us loves watching them and can’t get enough, What is common between Game of Thrones, Narcos, Sacred Games and Mirzapur. All of these “Seasons” with a record-breaking massive viewership in India did not air on traditional television and have reached to their audience and at such a massive scale by Video-on-Demand, or OTT.
If you have heard this term for the first time, let us define it for you. Over the top (OTT) is a term used to refer to content providers that distribute streaming media as a standalone product directly to viewers over the Internet, traditional television platforms that act as a controller or distributor of such content.
There are more than a dozen OTT platforms thriving in India who are capturing the potential billion eyeballs. Players like Amazon, Netflix, Alt-Balaji are using the power of fast-growing middle-class urban segment which wants to consume video content on the go, coupled with super-fast and economical Internet tariffs disrupted by the entry of Reliance Jio in 2016.
A recent report by global management consulting firm Boston Consulting Group reveals that they have made inroads into the country and will get even more popular going forward. The report pegs that the OTT market, which now stands at $0.5 billion, will grow to be $5 billion by 2023. According to the report, this growth is being driven by rising affluence, an increase in penetration of data into rural markets and adoption across demographic segments including women and older generations.
The Indian OTT Phenomenon – Additive, Not Cannibalizing
Overall, it is estimated that 16 percent of media consumption in India is already on digital media. Relative to developed countries, India is lagging. However, for the Indian youth, already 25 percent of media consumption is digital (as shown in Exhibit 4). This indicates that the growth in India is likely to catch up.
There is a distinct difference in the shape of digital consumption in India vs the Developed World. The digital consumption (relative to traditional TV and print) in India has been additive and not cannibalizing traditional media consumption. For e.g. in the past one year (between 2016 and 2017), overall media consumption grew for all segments of consumers.
Globally, OTT has become the key driver for video watching and media consumption growth, with an increasing number of people consuming over the top (OTT) content through varied platforms. In the last few years, OTT content has seen substantial prevalence when compared to conventional forms of video consumption. Revenues from OTT content has seen a CAGR of 40 percent+ for the period 2005-2017 and is expected to see a growth of 20 percent in the period 2017-2023.
The advantage of using OTT service is that it is less costly in contrast to other traditional modes and more efficient and customized in terms of consumption. Moreover, it’s more customized and convenient compared to the traditional modes.
The Indian OTT Space – Hyper Competitive, All the Players Vying for Consumer Attention
Indian OTT space is hyper-competitive and has attracted varying types of players which offer varied value propositions to the consumers and have different business models. All large successful broadcasters in India have launched their own OTT platforms. e.g. Hotstar, Voot, Sony Liv and Zee 5. These broadcasters have put their extensive TV content libraries online, supplemented by additional content through licensing and originals. In India, these players enjoy a strong brand and consumer awareness driven by their strong TV brands. These OTTs have a combination of ad-supported and behind the paywall content.
Global OTTs e.g. Netflix, YouTube, Amazon Prime have extended their services into India. Historically, India developed a video watching habit with YouTube. The global OTTs (e.g. Netflix, Amazon Prime) have started investing in local Indian content in a significant way.
How Much Cash is Involved? And it is only growing.
Most of these players and models have evolved and entered the market in the past 5 years. The year 2017 saw the first burst of “big money” being deployed behind Indian content on OTT. Heavy investments are now underway across multiple players. The numbers of players in the Indian OTT market have witnessed a 3.5x increase in the last six years growing from just nine players in 2012 to 32 in 2018 (as shown in Exhibit 7).
Investment for original content by OTT players is increasing at a fast clip. In addition, to live sports rights, the nature of shows produced is also evolving—tent pole properties built for OTT are at a cost per hour of the 3-4X cost of traditional TV content. The need to differentiate to attract eyeballs is enabling aggressive bets on original content. Sacred Games or Mirzapur can be cited as two such examples streaming on Netflix and Amazon Prime respectively.
The BCG report analyzed the types of investments being made on OTT content across platforms. These investments are in very varied forms of content with different propositions. For example:
- “Tent poles” or “hero content”: heavily marketed, premium content (higher cost of production)—meant to bring new eyeballs on the platforms. E,g: Narcos on Netflix, Mirzapur on Amazon Prime
- Hit movies—expensive to buy but attract eyeballs. Black Panther on Hotstar, Captain America on Netflix
- High profile sporting events. E.g: Indian Premier League on Hotstar
What is the Challenge? The Answer is Intense Competition
All the OTTs are Racing hard to be Among the top 3 Video Apps for Consumers. Most consumers (81 percent) have up to 3 video / OTT apps on their smartphone. Further, all platforms struggle with retention of consumers—on an average 50 percent of OTT apps installed are uninstalled in the first 7 days of installation. The competition for user share is intense—every OTT platform is vying to be among the top 3 of the consumer’s attention.
Just the Tip of the Iceberg
As per the report, the Indian OTT market is poised for growth and both ads supported, and consumer pay model will continue to co-exist. The consumer pay model could take many different shapes ranging from pure OTT Subscription Model to Telco drive aggregator model as well as Transaction based model, particularly in categories such as films and sports. It is expected to reach a market potential of $4.5 to 5 bn by 2023.
However, tapping this potential will require a host of player actions to fall in place; these include the availability of relevant differentiated content, development of regional markets and consolidation. As content evolves and becomes differentiated, we believe that consumer pay models will evolve further in India—with Subscription model becoming a substantial part of the market.