Hey Bheem,
Last week I wrote to you about streaming wars. This time around, let us dig in what we are witnessing in the Indian scenario. It has many more competitors, wider and more diverse audience and a rich history of film making as an Industry. Read on to know more about what our shift in medium led us to.
OTT: Over the top
In my previous post, we busted the narrative of streaming wars as nothing but a hype cycle that the media companies are indulging in to make the covering businesses little more dramatic. Fortunately, the readers in India have not been privy to any such war cry metaphors in the first place. This got me thinking, why exactly is that?
So, I went around digging articles that are being reported. Most of them have been sourced from two reports that are out there for each one of us to read but why would you? Unless, you would like to write about it like me. I skimmed through them and tried to parse the important and relevant takeaways we need to ascertain what is happening in the streaming industry in India.
One such report is the EY & FCCI report on the M&E (Media and Entertainment) sector. Lot of reporting has been based on this report. Journalists use this report for stating baseline figures, average subscribers and other data pertaining to the digital streaming industry.
We all know the general theme: Video consumption is booming in India. We Indians are one of the most entertainment hungry demographic. As if this was breaking news for us, we are known to the world for idolising Bollywood, Tollywood and Kollywood stars. We have some of the largest fans association in the world. So, it must be obvious that we would be leading in video consuming metrics as well. Luckily this report gives us numbers.
As per the BCG report titled “ Entertainment Goes Online “, about 81 per cent of consumers in India have up to three video/OTT apps on their smartphones. The average time spent by Indians (especially millennial) watching videos online has grown to 52 minutes per day in 2018 from a mere two minutes per day in 2012.
Users: How many ?
In this chart, we clearly see that Hotstar has the highest number of monthly active users. There is also another differentiation that we deliberately left out till now. The largest MAU users in India still belong to Youtube. It is a different beast in itself.
In recent past even they have started producing its own originals, it is yet to figure out what the heck it wants to do with them but it is a platform that allows anyone to create content, upload and then seek an audience. No OTT can compete it on the metric of generating supply. All of this comes with a certain set of caveats which would lead to deviation from the topic at hand. In essence, Youtube is the epitome of user generated content, meaning the users themselves create the content for youtube.
Much of the video viewing in India is happening in a local language and YouTube, which has ~265 million unique, active users has reported that over 95 per cent of its users watched videos in a regional language.
Source : KPMG report
Why mention them with OTT, then ?
Because according to Reed Hastings (Founder)of Netflix, anything that vies time away from their service is considered a competition to them, including sleep. Rather than stretching the competitors that far, I decided to settle with the same medium and same format, i.e Video on Internet ( VOD). Also, had to pick the two to show a complete picture and adjacent models that compete for users.
When watching time and engagement are considered golden metrics for any advertiser looking to advertise on these platforms. Most pale when compared to Youtube. By being an aggregator of user generated content, Youtube spends almost nothing on producing of shows. Yet, takes a significant chunk of the revenues through ads. No, OTT can scale advertisement to this level. Currently, many of the OTT services are also ad driven but the numbers are not lucrative for making a sustainable business out of it.
Market participants
This Graph from one of the reports categorises the companies neatly into sections.
Source: KPMG report
Breakdown of companies into categories helps us figure out things that have changed and things that haven’t changed in making TV and distributing it.
It needs to be re-instated that though the components of TV haven’t changed. The way they are stacked has and that is because of the change in medium. You can read the previous post to know what I exactly mean. Moving on.
Content Companies
We have huge production houses like Balaji, Eros and Dharma who are using their services to enter into the space and have their content if need be for the customers to access directly from them itself. But the pipeline of films or shows wouldn’t amount to much retention unless you are like altbalaji or dharma production which have dedicated crew working just for streaming launching a new show frequently.
In 2018, Dharma Production launched a digital content company called Dharmatic. Dharmatic is looking to bring a variety of content in formats such as long-form, short-form, reality shows, travel, food, and game shows for the OTT platform
They end up signing non exclusive agreement, meaning they also have their content on other OTT services simultaneously.
We have new upcoming content companies that cater to all the OTT services. They have mostly garnered their following through Youtube and now are collaborating with the OTTs to create some scripted shows.
So far none have taken the plunge to do a simultaneous release on their own digital platforms which suggests that they are in testing phase and not fully invested in the medium. The money doesn’t make sense at the moment, then the question amounts to will they change when the money equation changes? I guess, time will tell us soon.
But for now, content companies are swimming in the demand for new content. OTT's alone are to produce 1200 original hours of content in 2019.
Independent companies
In this category we have Netflix and Amazon vying for the top tier customers who are more sophisticated with their need and use of internet.
The dark horse in this one is MX player, a video player app in its previous incarnation and now a streaming service since its acquisition by Times internet. Times also owns Gaana ( music streaming ). It also has more than 100 years presence in Indian market with its newspaper publishing business and is angling to build a membership moat by cross pollinating its readers, viewers and listeners across varying services.
This strategy is hard if you don’t have commerce in your back pocket as Amazon does. Amazon with its penetration across business verticals in India has clearly shown that it is looking to garner as many paying subscribers for its prime membership as it can by offering as many services as possible. Especially in India, content and streaming becomes a major acquisition channel because of the craze we have for our movies. Amazon has mentioned multiple times that it has a budget of $200 million for Indian content.
This leaves us with Netflix. It was a pioneer in the US for being first and fast. And it has replicated the same in India. It has made people who follow shows in the west to have their favourite shows one click away. It is adapting to the market by offering mobile device only plans as it has realised more and more Indians watch contents on their phones. Jio data subsidisation has helped them immensely but the problem comes when the urban tier saturation begins. I am not sure though what is their strategy on penetrating tier 2 and tier 3 cities. More on this in a subsequent post.
They have been on a spree to acquire as much content as possible and also tied up with leading production houses to have more regional content originating out of India.
In the last one year, American players, including Amazon Prime Video and Netflix, have had to focus on local content to woo audiences in India. Netflix has announced a partnership with Dharmatic Entertainment, the digital content arm of Bollywood filmmaker Karan Johar’s company Dharma Productions for a range of original films and shows. It already has deals with Shah Rukh Khan’s Red Chillies Entertainment to create content and with Aamir Khan to acquire the actor’s movies. Arch-rival Amazon Prime Video, on the other hand, has long-term deals for feature films produced by Johar and actor Salman Khan. Together, OTT services are slated to invest about Rs. 2,500 crore in original content in India this year.
Disney India: Hotstar
Hotstar is in a league on its own. Simply because it does live sports as well. Being a cable company’s service has given it a huge boost in acquiring all streaming rights for sporting events in India. With 300 million subscribers it is the largest OTT streaming platform out there next to youtube itself in terms of MAUs. Those are huge numbers, plus it has a catalogue of shows across languages from its multiple TV channels. Making it more content dense and readily catering to the needs of the Indian market.
Walt Disney acquired Rupert Murdoch’s 21st Century Fox Inc. in a $71 billion cash and stock deal in June 2018, making Star India, Fox Star Studios, and Hotstar part of Walt Disney. Even though the two teams in the country have started working together, bigger changes are anticipated towards the end of the year.
Disney’s acquisition of Hotstar provides an avenue to tap further into the Kids content. At present, it certainly looks like Hotstar is well seated at the helm and looking down on others.
The thing though is that when medium changes, so do a few other things and when these changes come to fore Hotstar’s well oiled machine looks the most vulnerable.
Commonalities and trends
I have mentioned quite a few times about change in medium which is driving subtle changes in the industry. So, lets take a look at those and also the trends prevalent.
Demand for original content exploded. The total amount of fresh original content created for OTT platforms in 2018 is estimated to be 1,200 hours.
Every streaming service is ready to do originals. These are nothing but shows that are exclusive to the service and are produced on the streaming services dime. Range varies depending on the cast, story and creators.
Content became more diverse. We wouldn’t have had a Stranger Things or Leila if not for the streaming services.
Indian owned services are still producing more of the same but with a modern aesthetic shows to attract viewers. Liberties they don’t have on cable channels due to licensing and certifications are not prevalent on the OTT. So, they are making them more relevant and less moral.
More inflow of talent leading to diverse subjects and concepts being attempted. Small movies are finding an audience.
Viewers sensitisation with other language content. With the lack of friction provided by these services, people are willing to see more content even if they belong to a different language. All services are powered with subtitles for making it much more easy to follow for the viewer.
Teleco’s will be the major collaboration partner for any service looking to acquire huge set of customers in near time future as well. The majority of the services are still functioning as freemium or subsidised for the current duration through teleco partnerships.
Digital subscription grew 262% Indians started to pay for online content – well, more than they used to. We estimate that the number of Indians who paid for any content in 2018 (not including those who consumed content through bundled telco offerings) increased from 7.5 million in 2017 to 12-15 million in 2018. The digital subscription market accordingly grew 262% to reach INR 14.2 billion, of which the majority was video subscription. Telco bundling remained key, with an estimated 60% of consumption coming from such offerings.
There are about 5 or 6 breakaway points which would pull the whole sector one or another way but essentially what it has done so far is bring out great creators to a wider audience. There will be some consolidations or some acquisition, right now it is too early to call.
Even with so much of traction and attention there are few hurdles that plagues the sector and a few others that it has inherited by being in the content business in a market like India. But for now, what you will see is a race for good and edgy content. Every service fighting for streaming rights for every new film release. Leading to spur of opportunities for many more creators. In contrast to the previous era of being limited by the weeks of the year and festival seasons in the case of movie releases. I will close now by saying, gates have opened and for once job opportunities are looking up in TV making business. Like it was mentioned in one of the reports, India could be the production house of the world.
I will close this post by asking you to ponder on this question:
If content can be taken as a commodity in terms of trade. Leveraging our diversity and Industry history, we could look at a real possibility of content explosion that caters to the entire world’s audiences with stories created in India. Then, whatever market estimates and trends we have been mulling over becomes insignificant. But, why are we not looking to be the production house of the world?
I will have my answer and much more in a subsequent post.
Regards,
Vivek
The Duologue is an effort by Vivek and Bheem to have a dialogue about varying topics.
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