Two’s Company, Three’s a Crowd? Implications of Oodles of Video OTT Players

With the influx of a plethora of players in the video OTT space, what does it mean for the Indian OTT Market?

The OTT juggernaut is rolling on real quick! And it is quite evident from the fierce competition amongst telecom companies, cable service provider, content studios and mobile companies wanting to have a slice of the OTT entertainment pie. What is now dominated by some of the independent platforms like Amazon Prime, Netflix, Hotstar, Eros Now, SonyLIV and a few more, the OTT space is all set to witness entrants like The Walt Disney Company (with Disney+) and Apple (with Apple TV+) joining the bandwagon. Behemoths like BBC, NBC, and HBO also have plans to venture into this business in the coming years. In a report by FICCI, the number of players in the OTT market has grown from 9 in 2012 to 32 in 2018.

Now, the big question raises- With the competition intensifying, what will be the implications on the OTT industry? Will it stand at an advantageous end or experience a nosedive? Here’s looking at all possible perspectives..

How is the Video OTT Industry Performing Currently?

In fiscal 2018, the OTT market stood at Rs. 2,150 crores, while it currently stands at Rs. 3,500 crores. As per a report published by Indian Express, India has 371 million internet users and 1.3 million OTT subscribers as of June 2018, of which 66 million are identified as unique video viewers. With big broadcasters and content producers being an active part of the OTT ecosystem and novices entering the business (Watcho, MXPlayer, ShemarooMe, etc.), the OTT market is growing at a CAGR of 10.1%, says a study by ASSOCHAM & PWC. In fact, by 2022, the industry is expected to record Rs. 5363 crores.

Lloyd Mathias, Business and Marketing Strategist and former Asia-Pacific Marketing head of HP Inc. expresses his observations on the current OTT scenario in India. He says, “The OTT market in India is in its early stage with about 40 players today, but given the huge increase of broadband coverage and India’s data pricing being the cheapest in the world, this is set to grow exponentially in the days to come. OTT users in India will reach 500 million by 2020, making India the second biggest market after the US.”

We see an overall change in the media and entertainment landscape today, which has managed to evolve beautifully and empowered the consumer by many folds. While TV continues to be a people’s favorite, OTT is slyly making its way to the Indian audience, enhancing the content consumption and creation ecosystem. Having said that, the lines between media and technology companies is blurring due to their convergence. The coming times will witness brilliant content offerings and equally powerful and state of the art consumption platforms.

Here’s how the ecosystem of the online video content industry looks like today:

Aggregators like Vodafone, Tata Sky, Airtel, etc. are another key participants of the OTT ecosystem and can be seen as active participants too. While OTT platforms came up with originals and offer complete content, these aggregators hold limited content rights only. Several OTT providers today are piggy riding on partnerships with these telcos to acquire their viewership base, assuring them of minimum guarantee of a subscriber base. This works on a revenue-based model, where the OTT players gain better penetration and reach in return.

The aggregator model is fairly new but is sure to be the next big thing in the OTT space. With Reliance entering as an aggregator itself, it is expected that telecom will give a tough fight to the existing OTT players and will look after the content in future.

Rulers of the Chart

Here’s looking at some of the top players in the game and analyzing their position in the market today. Their strengths are based on a dipstick survey done internally, amongst 10 respondents between 22-28 years of age:

Reverberations on the Indian OTT Industry

With the competition intensifying each day and more and more players striving to eat the market share, its reverberations are distinctly seen on some of the prime parameters that make for the video OTT world. In my opinion, here’s how some of the key areas are being and would be influenced by inundation of OTT players in the market.

Content- The King!

You’ll be surprised to know that the total amount of fresh original content created for OTT platforms in 2018 is estimated to be 1,200 hours, says a report by EY. While Zee tops the chart of announcing a planned spend of INR 25-30 billion in exclusive content, Hotstar plans about INR 1.2 billion on originals. Amazon and Netflix collectively are expected to spend over INR 10 billion a year in India. 

The Indian market, newly exposed to OTT, is hungry for newer forms of content. And as a natural consequence, demand for content has increased significantly. These platforms have encouraged content creators to experiment and do different things.

Speaking on the same lines, Ali Hussein, COO, Eros Digital comments, “The beauty of the digital medium and the on-demand nature of the OTT service is that ability to “pull” content as per one’s individual choice and discretion. This gives the ability to both creators, performers and various contributors to reach a much larger audience. We have also seen the OTT platform enables creators to expand their genres and experiment with storytelling as well as techniques which are restricted in the traditional media.”

Hussein also shares his thoughts on how OTT players are at an edge these days, owing to their great content. He says, “What happens is there are different kind of content strategies. There are different objectives, different story narratives, different psychographic and demographic of audiences that we are targeting. So, unlike the broadcaster’s, which is controlled in terms of the time slots and programming, this allows for even some of the relatively smaller OTT players to have an opportunity to produce a show or launch a show that might actually get consumer traction.”

Mathias also expresses his views on the same. He says, “OTTs are rapidly gaining in popularity as they provide a wide range of content – often unregulated- most of which are free and easily accessible. Till a few years ago, television content was being provided only by broadcasters, DTH Operators, multi-system operators, and cable operators. But with the entry of OTTs, this has changed, tilting the focus to the end consumer, and offering him significantly enhanced choices.”

This trend has, in turn, led to an increase in content rates, and till the time consolidation takes place in the OTT segment, we can expect content companies to continue to benefit from this trend. In addition, India has the capability to become the production house of the world, given its large talent base and ready-to-use infrastructure.

The Price Factor

In a bid to increase their subscriber base, OTT platforms in India are making offers that are easy on the consumer pockets. The strategy is two-pronged: offer packages for shorter durations and also, allow consumers to buy subscriptions to select content.

Talking about the top players, Netflix has come up with weekly and monthly ‘mobile-only’ plans, starting at INR 65 & INR 250 respectively. The new monthly plan is 50% cheaper than its current basic plan of Rs. 500, but still expensive when compared to its rivals — Amazon Prime Video costs Rs. 129 per month across screens while Hotstar Premium, which has global studio content, is available for subscribers at Rs. 199 per month.

Here’s a chart depicting the OTT Revenue model:

The price race in inevitable and never-ending. By 2021, it is expected that 30-35 million subscribers will pay for OTT platforms (and a further 350+ million subscribers accessing bundled OTT services from telcos), however, consolidation will be needed for the platform profitability, says a report by EY.

Call for Self- censorship

Today’s audience wants to see the content in an unadulterated and uncensored form. They want to appreciate an artist’s work in its purest form. However, with questions being raised, all major players (Netflix, Eros Now, Hotstar, SonyLIV, Jio, Amazon Prime, etc.) agreed on a self-imposed censorship code that prohibits them from showing banned content on their platform. This has been drafted by The Internet and Mobile Association of India (IAMAI), along with a redressal mechanism for customer complaints.

This code will help the platforms conduct themselves in a responsible and transparent manner and ensure that the audience interest is protected. Further, it will respect the creative freedom of content creators by fostering innovation and abiding by an individual’s freedom of speech and expression. The idea was to avoid any other entity calling the shots on censorship.

Commenting on the same, Uday Sodhi, Head of Digital Business at Sony Pictures Networks says, “OTT platforms have agreed to self-regulation of content. This means we will be rating the content being shown on OTT platforms and to provide better information to users about what to expect from the show. Besides this, content that is illegal and harmful as per the current laws of the land will not be available on OTT platforms. There is also a mechanism to ensure consumers can report any content that they believe is not as per guidelines.”

Hussein being associated with the OTT sector directly expresses that little or no regulation helps bring out the best of this medium. He says, “The regulatory design is yet to be determined here. Currently, a lot of the regulations that are being considered and talked about have been from a regulatory standpoint. They are more in terms of messenger apps and voice calling apps. On the video side, that clarity has not yet been made available yet from a regulatory standpoint. Though we are governed in general by the larger kind of information under IT Act, I think self-regulation as a premise is a great concept to have because it’s kind of promotes overall growth of the ecosystem, where there is a freedom given to the creators to be also responsible for the kind of content they create and publish.”

Mathias adds here, “Presently, the popular OTT apps such as Netflix, Star’s Hotstar, Amazon’s Prime Video, Zee5, SonyLIV, ATL Balaji, and Times Group’s MX Player are governed by regulations under the IT Act. So they really have no obligation to follow the guidelines and mandates by the Information & Broadcasting Ministry which governs traditional broadcasters and DTH providers.

The registered broadcasters – who pay a license fee and carriage charges – now have a cost disadvantage over the OTT players, who do not pay any license charges or undergo minimal censorship. These cost saving can be channelized into producing and sourcing better content, thus enticing better audiences and attracting advertisers.”

Content forms the premise of these OTT platforms. It is the first thing that draws the audience here. In my opinion, self-censorship and self-regulation don’t stem from societal ethics but are motivated by fear (of state, authority and self-appointed defenders of morality). As of now, with just about no censorship intervention, players are raking in the viewerships. OTT is emerging to be a medium with an “A” certification as opposed to television which is meant for all. I do believe this is going to be short-lived as censorship and government control will hit the medium later than sooner.

Devices and Internet Making Way for OTT

Companies now have it easier to reach out to a broader audience, especially to regional markets and smaller towns, with the increased availability of 4G services in India. Additionally, we see a great data war in telecom operators after Jio has entered with VoLTE in India, and the merger of Vodafone & Idea, aiming for an improved quality of data. In a report by Kantar IMRB, it says that India’s internet market is expected to register 627 million by the end of 2019, owing to its rapid growth in rural areas.

To grab the attention of this set of audience, localization and differentiated content is becoming crucial for these OTT platforms to offer. We have also witnessed the global streaming platforms in the previous years investing in local content and originals as they look to gain scale. This calls for a great opportunity of content creators, who are seeing both global and local streaming services invest in greater volumes of content with larger budgets.

The above trends have sequentially doubled the paid video subscribers in 2018 on these OTT platforms, says a report the EY. The video subscription revenues grew almost four times in 2018 to reach INR 13.4 billion. The foremost reasons behind this is the influx of plenty of video streaming platforms, OTT pricing closer to TV pricing, the spread of affordable broadband, greater penetration of smartphones, regional language content, live streaming of major sports, etc. If the same growth trend follows, we might just witness 30-35 million paying OTT subscribers by 2021.

Effect on Advertising

With the raging success of OTT, advertising and subscriptions are deemed to grow too. The methodology of monetization will become stronger and there will be an increase in the number of advertisers and subscribers. While advertisers globally look for a brand-safe, high-quality and an addressable environment, OTT platforms are in the league to provide the same, just as TV.

Hussein shares his views on OTT Advertising. He says, “Now that the audience is moving to digital, advertisers will also start going to digital in that regard. I think the interesting thing is the kind of change that will happen down the line where there is enough critical mass of both quality of users as well as the quantum of viewership happening frequently and that frequency can be defined as daily, weekly, monthly.

I think the way India is currently structured, the mass market on the TV side will grow for another two to three years, while a lot of the niche channels will start shifting and have already started shifting to digital and that trend will continue. So, even if you see a lot of analysts’ reports, the growth of the digital advertising businesses and the digital video business in specific has almost been threefold on that of the traditional kind of TV advertising business.”

Change of Release Windows

The rise of OTT players will eventually result in a billion screens. Indian cinema will see a parallel release of movies in theatres as well as on pay OTT platforms in the coming years. This will come in the form of direct-on-OTT films and a pre-theatrical premium digital window, helping creators reach a wider base.

In the Foreseeable Future

Survival of the Fittest

The rapidly increasing over the top (OTT) space is likely to see consolidation over the next five years, says a report by FICCI. The number of players in the digital space will shrink, where just the top 7-8 will survive in the coming years. This is so because a consumer would not need 100 apps. He will ultimately settle down with top players in the market, like on television.

If we look at the trajectory of OTT space in India, it is evolving just as the television did- from state-owned to private to exclusive channels to international channels. OTT started out with generic and is now on its route to specialization.

Will OTT be the New TV?

“OTT has upped the ante on quality. Production values of content on offer is stupendous. For folks tired of low production quality and content on television networks with low -budgets, are bound to gravitate to OTT. OTT is going to gradually eat into TV networks and their offerings.” says Harish Bijoor, Founder, Harish Bijoor Consults Inc.

With the impact of the TRAI Tariff Order, implications on total viewership, free television uptake, channel MRP rates, and advertising revenues are expected to be seen. However, with the increased parity between television and OTT content choices and costs, the OTT platforms are sure to benefit from it. The attractiveness of TV is bound to get affected since large broadcasters have removed their content from FreeDish. And given the convenience factor, the impact on traditional TV viewership is bound to occur.

In my view, there’s so much that OTT space is witnessing and is yet to witness. The game is getting stronger each day, giving a tough fight to the viewership numbers of TV channels. It is very likely that the popularity of TV channels will plummet, owing to the growing demand for OTT content.

However, Romil Ramgarhia, COO, BARC India expresses that the consumption of TV isn’t diminishing. He says, “In India, TV viewership continues to grow alongside digital video consumption. The availability of high-speed internet, a plethora of OTT platforms, and a vast array of regional and original content have made the digital video ecosystem extremely ripe. Parallelly, audiences are also engaging more with their television sets and we see new channels being launched year on year catering to various audiences with a brand new content line up.  In 2018 alone, 75 new TV channels were launched of which 52 channels were catering to regional audiences. The Indian consumer today has access to all kinds of content, and the same content is also available across screens.

Let’s see how the future of TV & OTT platforms unfolds in the coming years and if the latter one successfully supplants the former! All eyes on it!

Concluding Thoughts

India has been an incredible video industry (TV & films), running successfully for decades. That being said, alternative forms of content creation and curation have emerged and will possibly grow faster than their speed today. In most parts of the world, including India, OTT will be an ‘and’ and not an ‘or’, in my view. To say that OTT technologies have disrupted the Indian Entertainment sector would be an understatement. Although there is a long way to go, I am sure the OTT space is here to make some big wins!