OTT Platform: How India will adopt?

Reed Hasting (CEO of Netflix) to Inc., “the company was preparing itself for an internet-based future, Netflix had at least a decade left of dominating DVDs.” He also said “Movies over the internet are coming, and at some point it will become big business.” Hasting said this in 2005. If we look back and see today than we can say Hasting was absolutely right.

Nowadays, OTT or Over-the-Top seems to be the new trendy term in the digital and media industry. Through the years, our way of watching video content has changed. Initially performed by telecom operators, and slowly moving towards the Internet, TV broadcasting switched from terrestrial networks to wire-based. This technology, added to the development of high speed networks and mobile internet, allowed the birth of OTT.  YouTube was, for a while, the leading provider of video content on internet allowing the users to be in control of their audiovisual content for the first time.

 Revenue models of OTT Platform

AVOD – AVOD stands for Advertising Video on Demand. In this model, streaming video is delivered as a free service for end consumers. A prominent example of this service is YouTube. We are all familiar with how YouTube works. Here, we are asked to create an account for personalized video experience. But, we are not charged for accessing the video content library. So, can you guess how does YouTube make money? Yes, you are right! It is advertisement! Advertisements are the economic engine for businesses that operate under the AVOD model. Such ads are placed at the beginning, middle and end of the video. 

Examples – YouTube, Yahoo Screen, AOL On, FilmOnX 

TVOD – TVOD model is quite straight forward. Standing for Transactional Video on Demand, in TVOD, businesses charge users for every single watch, every single time. It is also known by other names such as PPV (Pay per View) or PPD (Pay per Download). 

Examples – iTunes, Amazon Instant Go, VUDU, CinemaNow    

SVOD – Short for subscription video on demand, SVOD models are the clear favorites among consumers. SVOD offers its users access to an entire library of video content by simply signing up for a subscription (monthly/ quarterly, annual). It is estimated that 3 in 4 US households have an SVOD service. And, the number of households with more than 1 SVOD subscription is rising. Netflix is the leader of the pack, with Amazon Prime and HULU among other top OTT services. Together with YouTube, these three services account for 79% of the total time spent viewing OTT in the US. 

Examples – Netflix, Amazon Prime, HULU, Curiosity Stream, HBO Now 

Hybrid Model – Hybrid models combine the best of worlds by bundling the services in different ways. An example of how that might work out is when the user signs up; he is provided with a library of content. The user can also choose to opt-in for a paid pack to excess certain exclusive content. This paid pack can be either in the Subscription or the Pay-Per-View model. 

Example – Hotstar

Multi-Screen Model – Multi-screen models allow OTT providers the option to their customers to subscribe to a service which enables them to access streaming content on multiple devices so that they can watch anytime, anywhere. 

OTT in India

In this blog we will mostly focus on Indian market. There are currently about 40 providers of over–the–top media services (OTT) in India, which distribute streaming media over the Internet. In fiscal year 2018, the OTT market in India was worth ₹2,150 crore (₹21.5 billion, US$303 million as of 2018), and its value grew to ₹35 billion in 2019. According to a KPMG report, the average time spent by Indian subscribers on various OTT platforms is 20–50 minutes.

The first dependent Indian OTT platform was BigFlix, launched by Reliance Entertainment in 2008. In 2010, Digivive launched India's first OTT mobile app called nexGTv, which provides access to both live TV and on–demand content. NexGTV is the first app to live–stream Indian Premier League matches on mobile phones and did so during 2013 and 2014. OTT gained significant momentum in India when both DittoTv (Zee) and Sony Liv were launched in the Indian market around 2013. DittoTV was an aggregator platform containing shows across all media channels including Star, Sony, Viacom, Zee, etc.

 

Hotstar, (now Disney+ Hotstar), is the most subscribed–to OTT platform in India, owned by Star India as of 2018, with around 150 million active users and over 350 million downloads. In 2019, Hotstar began investing ₹120 crore in generating original content such as "Hotstar Specials". 80% of the viewership on Hotstar comes from drama, movies and sports programs.It gained its foot because now people could watch cricket matches on phone. In fact, in the initial phase, watching a cricket match on Hotstar was free. Today, Hotstar offers a ‘Sports only’ subscription model for sports enthusiasts, knowing very well where its most viewers come from.

Sony Liv, owned by Sony Entertainment Television group, tried to go ahead by putting its entertainment shows on the platform. ‘The Kapil Sharma Show’ is its USP. It also owns rights to telecast European football, especially ‘La Liga’ and the coveted ‘Champions League’.

Amazon’s Prime Video integrated its Amazon ‘prime membership’ with the platform. With not much to offer initially, it came up with Indian ‘stand-up comedy’ specials. Later, it also started production under ‘Amazon Originals’ much like its rival and older player of the game, Netflix.

 Netflix entered India in January 2016. It earned a net profit of ₹2020,000 (₹2.02 million) for fiscal year 2017. In fiscal year 2018, Netflix earned revenues of ₹580 million.According to Morgan Stanley Research, Netflix had the highest average watch time of more than 120 minutes but viewer counts of around 20 million in July 2018. As of 2018, Netflix has six million subscribers, of which 5–6% are paid members.

Indian market is different from developed countries. In a country where we own less number of smart TVs but many smartphones, most platforms have tried to capture this mobile using youth. Netflix offers shared account, where more than one person can use. In fact, it offers a ‘Mobile only’ subscription at just ₹199. Hotstar offers a ‘sports only’ subscription owing to its massive sports broadcasting segment. Sony Liv offers subscription on daily and weekly basis as well.

How India will adopt?

As every coin has its two sides so does OTT platform. One is audience and second is creator. In order to see how India will adopt we should study both sides.

If you look at India’s customer segmentation through the lens of paying consumers across TV and digital, this is the chart:

 Digital only – consume content only on digital platforms, do not access television.

Tactical digital – Consume Pay TV and at least one paid OTT service .

Bundled digital – Consume Pay TV and generally only telco-bundled content.

Mass consumers – Consume Pay TV & occasionally some free OTT content.

Free consumers – Do not pay for content.

 

India’s over the top (OTT) industry has jumped a whopping 240 percent between 2016 and 2019. According to KPMG Media and Entertainment Report 2018,  the Indian OTT market is expected to grow 45 percent to reach ₹138 billion by the end of fiscal 2023. According to a report by Ernst & Young, the number of OTT users in the country will reach 500 million by 2020, making India the second–biggest market after the US. In addition to this lockdown has also boosted viewership on OTT platform.

Nielsen smartphone panel reports spike in metros is around 19% vs. Non Metro 23%, averaging almost 4hrs/per week VOD consumption- this was in early April. Ads on OTT platforms doubles in April 2020 month on month according to data release by media research firm TAM- March: 16000 ad insertions

April:  32000 ad insertions ( this doesn’t include Netflix and Amazon because they don’t show ad)

 

Application like telegram is also gaining lots of download due to lockdown and this app is for free and all OTT content from various platform is available at one platform for free yes sounds good . In India Hotstar have more subscribers than Netflix because of its cost and cost factor will always plays an important role in India. But still subscriber will increase but at some time growth rate will come down.

 

Now coming to second side of coin i.e. is creator. Now if we see main reason people are adopting OTT platform is due to its original content. Initially Indian origin platform fail to attract customer because they didn’t create original content like Netflix did, this platform just shows serials and old movies. Hotstar got popularity due to sports and currently its 80% revenue comes from sports and Hotstar special which is original content of Hotstar. ‘Sacred game’ of Netflix was first originally created content by OTT platform in India and gained lots of popularity. Amazon for Mirzapur , patal lok ,etc . Voot for Asur and many more gain popularity due to original content. Now to survive in this market they have to continue creating original content and invest huge money.

Now coming to recent change, Bollywood movies made for theater releasing on OTT platform. But how producers will get benefited with this. I will give you two examples which will show two different trends that may make change movies made for theater.

 

First is 1^st Bollywood movie made for theater release was recently released on Amazon prime ‘Gulabo Sitabo’ which was sold to Amazon for Rs 60-65 crore making straight profit of 30-35 crore . Expert said that gulabo sitabo wouldn’t have earned 60 cores if released in theaters due to mixed mouth of words.

 

Second example  is of Akshay Kumar starrer ‘Laxmi Bomb’  which is sold to Hotstar for whopping Rs 145 crore yes almost 3 times of budget but expert told that this movie had ability to earn 200 crore by the buzz going on.

 

There more 7 Bollywood movie which was meant to be theater but due to covid 19 pandemic it will directly release on OTT platform.  Now for producers releasing movie on OTT platform is like investing on FD(low risk and limited revenue) and releasing at theaters is like investing on shares ( High risk and more revenue) . Yes this fixe revenue will attract producers to release movie on OTT platform and in future we may see more movies releasing on OTT even after corona pandemic gets over.

 

OTT platform will gain more popularity and will give tough competition to theaters. Following are the reasons

-The choice and diversity of content on this platform is much greater.

-A film theater has catered to mainstream audience expectation for business reasons and due to this many deserving films miss out.

-OTT platform give convenience to see stuff from anywhere.

-Audience that hadn’t discovered OTT viewing are coming to these platforms, especially from tier-2 and tier-3 cities.

According to PwC’s Global Entertainment and media Outlook, the OTT market in India is predicted to grow at 21.8% CAGR from Rs 4,464 crore in 2018 to Rs 11,976 crore and Indian domestic film earnings in 2019 of Rs 11,500 crore. This indicates that OTT platform will earn same as Indian Domestic films after 4 years.