India’s VOD market — A snapshot of the last five years

For the last five years, I have closely seen India’s video-on-demand (VOD) industry. Like any other consumer tech business, it is growing and evolving rapidly. This post is my modest attempt at presenting the industry’s snapshot over the last five years.

As per FICCI’s M&E report, India’s media and entertainment (M&E) sector is currently (2020) a $19 billion industry. It grew by 57 per cent between 2015 and 2019 to reach $25 billion, but suffered a significant setback due to the COVID-19 pandemic and collapsed by 24 per cent during 2020. It is now projected to grow at 17 per cent CAGR to become a $30.6 billion industry by 2023.

Digital media, especially VOD, which is popularly referred to as OTT (over the top), is one of the fastest-growing M&E sectors. In fact, only digital media and online gaming registered a growth in 2020.

As per PWC’s forecast, India’s SVOD market, which is currently (as of 2019) worth $708 million, will grow at a 30.7 per cent CAGR to become a $ 2.7 billion market by 2024. India will overtake South Korea, Germany and Australia to become the sixth-largest VOD market globally.

When I joined ALTBalaji in 2016, the VOD market in India was at a nascent stage. Though services like Eros Now, Hungama Play, SonyLIV, dittoTV and others had existed since 2012-13, the first significant milestone was the launch of Hotstar by Star TV Network in 2015. Launched as an AVOD platform, Hotstar introduced subscriptions in 2016. The same year, international giants Netflix and Amazon Prime Video commenced services in India.

ALTBalaji, a truly home-grown SVOD platform for fresh and original content, was launched in 2017. Since then, the industry has not looked back. Today, there are more than 30 OTT services that include telecom-owned platforms like Jio Cinema and Airtel Xstream. TV network-owned platforms like Disney+ Hotstar and Zee5. TV and movie production house-owned platforms like ALTBalaji and ShemarooMe. Media conglomerate-backed platform like MX Player. Regional players like Hoichoi and Aha. And last, but not least, international platforms like Netflix, Amazon Prime Video, and Discovery+.

Over the last half-a-decade, the VOD market in India has transformed a lot. Content, the supporting ecosystem and consumer behaviour have evolved considerably. In 2015-16, domestic OTT platforms mostly streamed aggregated movies and TV shows, live sports, and catch-up content of TV channels.

TVF was the undisputed leader of the original Hinglish ‘web-series’ category. The web-series primarily catered to youths. TVF monetised the content through YouTube and sponsorships. Today, OTT platforms target diverse audiences across different age groups, and explore a wide range of topics and genres.

Unlike TV and cinema, there are (were) no specific content guidelines or regulations for OTT platforms. Hence, it sees a massive influx of edgy, bold and, to some extent, sleazy content. Nevertheless, it gives storytellers a platform to explore unconventional topics and tell the stories they always wanted to.

The growing middle class, with rising disposable incomes, is also curious to explore niche categories like international cuisine, travel, lifestyle and home decor. In the upcoming days, I expect to see more content exploring these topics. Thanks to dubbing and subtitling, the Indian audiences are watching non-English international shows and movies.

Similarly, the content produced in India is being appreciated globally. There lies a fabulous opportunity for independent and regional language content producers to exhibit their work on OTT platforms.

According to EY’s estimates, in 2025, the share of regional content consumption on OTT platforms will increase to 50 per cent. During the pandemic, even big banner movie production houses launched their movies directly on OTT platforms.

Apart from content formats, OTT platforms are also experimenting with gamification, and interactivity in and around the content. The platforms claim that the gamification layer improves engagement and offers an innovative marketing solution to the brands. Some notable examples are SonyLIV’s KBC Play Along, Voot’s live voting for `Bigg Boss’, and Watch ’N Play by Hotstar.

Flipkart Video, a video destination for Flipkart’s customers, has also produced multiple interactive game shows. MX Player has gone one step ahead and launched a games section in the same app. In collaboration with AXE and Mindshare, it has also created an interactive short film. To create awareness about breast cancer, ALTBalaji, in association with Grey Group India, had launched ‘Breast Buffer’ campaign. The regular buffering symbol was replaced with ‘Breast Buffer’ symbol. Whenever the content buffered, the symbol popped up as a reminder for self-examination.

OTT content production is a costly affair. The cost of each episode of a show produced for OTT platforms is 5x-10x higher than that of TV shows. The primary reason is the show’s duration. A typical TV daily soap has 250-plus episodes, while the shows produced for OTT platforms have 10-15 episodes. TV shows can absorb the fixed costs over an extended period.

Still, international and domestic OTT platforms are investing heavily in producing original content for the Indian market. Netflix had announced an investment of ₹3,000 crore (about $0.4 billion) in 2019-2020, and Amazon had announced to double its investment for Prime Videos.

In 2019, OTT platforms produced over 1,600 hours of original content, and despite stoppage of shoots for five months in 2020, created 1,200 hours of original content. Though every OTT platform aspires to build its own video destination and, thus, ‘own’ the consumer, exorbitant production costs and high customer acquisition costs push many platforms to syndicate even the original content on other larger platforms. Such syndication dilutes the exclusivity of their service and often cannibalises direct subscriptions.

Even though there is a lot of buzz about new ‘original content’, any unseen show or movie is fresh and original from the audience’s perspective. Due to limited prime time slots and as TV channels are still majorly supported by ad revenue, it becomes challenging for networks to monetise their library content on TV.

OTT platforms offer a great opportunity to TV networks to monetise even their old shows. One of the best examples is the newly-launched service Discovery+. Especially in India and other emerging countries, where more than 97 per cent of the households are single TV households, infotainment and lifestyle TV channels have to compete with general entertainment channels (GECs), news and sports for TV screen time.

I firmly believe that millions of viewers, who are interested in infotainment, but usually miss the shows due to TV’s appointment-based viewing experience, will subscribe to Discovery+. They will be thrilled to catch up on the shows that they have missed on TV.

Usually, a major sporting event, a new movie, or a tent-pole show helps an OTT platform acquire many subscribers. But it is always challenging to retain these subscribers. Hence, most OTT platforms in India promote quarterly, or annual packs. Usually, a robust content library with breadth and depth helps in controlling subscriber churn.

But even Hotstar, with an extensive content library, finds it tough to retain subscribers acquired during sporting events. Hence, during the 2020 Indian Premier League (IPL), only annual pack subscribers were allowed access to IPL.

But I believe, sometimes, just the presence of an extensive content library helps in retention. I may have watched just 12-15 shows/documentaries on Netflix in the last 12 months. But I am sure that I would not have renewed the subscription if only those 12-15 shows were available. The vast library of Netflix made me hold on to the service.

Though content is, and will always be, the king, the supporting ecosystem, especially telecom, payment gateways and wallets, and smartphone manufacturers plays a pivotal role in the VOD market’s growth.

Telecom companies provide Internet connectivity and extend support in distribution and billing. OTT platforms have acquired a significant number of subscribers and generated substantial revenue through telecom partnerships.

In 2020, 284 million users consumed content that was bundled with their data plans. I believe this consumption must be on telecom OTT apps like Airtel Xstream, Vi Movies and TV, and JioCinema. Telcos spent around ₹700 crores ($100 million) on content.

At the start of 2016, there were 13 telecom operators in India and 136.5 million broadband (wireless + wired) subscribers. Mobile data was expensive; even streaming songs on wireless data was a luxury. The landscape changed post the launch of affordable 4G services by Reliance Jio in September 2016. It sparked a price war in the market.

To match Jio, incumbents had to upgrade their network infrastructure and reduce mobile data charges. But unfortunately, not all operators could survive the onslaught. As of January 31, 2021, there were only five telecom operators, but 758 million broadband (wireless + wired) subscribers.

Surprisingly, wired broadband subscribers are growing at a snail’s pace. At the start of 2011, there were 10.7 million wired broadband subscribers, and as of January 31, 2021, there were 22.67 million wired broadband subscribers. I am sure JioFiber will disrupt this sector.

Owing to the cheapest mobile data rates (₹6.7/GB or $0.092/GB), the monthly mobile data consumption has skyrocketed. Indian wireless broadband subscriber, on an average, consumes 13.5 GB of data per month.

The payment ecosystem that is crucial for SVOD OTT platforms, has also evolved a lot. Mobile wallets like Paytm and Freecharge offer a relatively seamless payment experience than cards and net banking. International payment giants like PayPal and Amazon Pay have also entered the highly competitive space. Because of the ease of use, regional language UI and cashback offers, these businesses could acquire millions of users even beyond the top metro cities. The customers prefer them for small ticket and frequent transactions. Using these PGs and wallets’ services, OTT platforms have gained paid subscribers even from Tier-II and Tier-III cities.

The biggest game-changer, though, was UPI’s launch. It has completely changed the market dynamics. Because of UPI’s deep penetration beyond metros, many domestic OTT platforms are witnessing tremendous growth in subscribers from Tier-III and Tier-IV cities.

UPI has unlocked Bharat’s potential. Recurring payments currently supported under UPI 2.0 will be a shot in the arm for subscription services, making it the preferred payment option for OTT platforms and subscribers.

But unfortunately, not all players could adapt and survive. Paypal has announced its exit, while many others have lost their mobile wallet share to Paytm wallet and UPI. Telecom billing, once a popular payment option, is no longer preferred by OTT platforms or subscribers.

India, the second-largest smartphone market, is projected to have 820 million smartphone users by 2022. Over the last five years, this space has seen many new entrants and exits of incumbents.

Budget Android smartphones are available for as low as ₹5,000 ($80). Affordable handsets with decent specifications and cheap mobile data have made India a mobile-first or, to a large extent, mobile-only market. Hence, the launch of affordable mobile-only subscription plans by international OTT platforms is nothing, but a price cut for the Indian market!

Audiences prefer to watch some shows, movies and documentaries on a big screen with their family. Hence, popular and affordable smart TVs like Mi TV and Internet-connected devices like Fire TV also help OTT platforms in acquiring new subscribers. It is projected that by 2025, there will be 40 million to 50 million Internet-connected devices in India.

There is no doubt that the Indian audience has embraced OTT platforms with open arms. According to Comscore and EY estimates, in 2020, there were 468 million online video viewers in India. According to Limelight’s State of Online Video 2020 research report, with an average of 10 hours and 54 minutes each week, India tops online video viewership.

‘Will Indian consumers ever pay for SVOD service?’ is no longer a topic of debate. In fact, millions have already subscribed to multiple SVOD services.

In 2020, 28 million subscribers paid for 53 million OTT subscriptions, leading to a 50 per cent growth in digital subscription revenue. Still, the percentage of paying subscribers to the total online video viewers is less than 10 per cent.

Thanks to significantly stable mobile networks, consumers are now utilising even their commute time to watch OTT content. Every subscriber now has his/her own prime time! OTT platforms are, hence, engaging subscribers according to their (subscribers) prime time.

Even though DTH and cable operators have launched their own Smart STBs and forged alliances with OTT platforms, I don’t see cord-cutting becoming mainstream soon. The majority of prepaid mobile data packs offer 1-2 GB/day. One hour streaming of SD quality (480p) video uses 0.7 GB, HD quality video uses 0.9 GB (720p), 1.5 GB (1080p) and 3 GB (2K).

It is evident that even at dirt cheap mobile data rates, the daily allowance is not enough to binge-watch even one show. So, unless the cable/DTH cord is replaced by another cord (wired broadband, or daily wireless data allowance is increased 10 folds, and rates are further slashed, cable and DTH services are here to stay.

According to EY estimates, there are 10 million digital-only consumers in India, i.e., they consume content only on digital platforms and do not access TV. I assume most of these digital-only consumers are not wilful cord-cutters, but don’t have access to TV.

With the increasing number of OTT platforms, audiences are finding it difficult to search and discover content. Tracking multiple subscription cycles is becoming a nightmare. I strongly sense a need for a universal catalogue, search, and recommendation platform for all OTT content. Smart TVs and Internet-connected devices have built universal search and catalogue, but it still lacks personalised recommendations based on the user’s consumption pattern and liking.

Though OTT platforms may initially express reservations about sharing user history and usage data, I am sure we will soon have a universal catalogue that will enable discovery, search and content recommendation from all the participating OTT platforms. Unlike TV, there is no cut-throat competition for the prime time slots; hence I believe it is in OTT platforms’ interest to share the information.

With 30-plus OTT platforms, it already looks like a crowded space. But there is enough growth opportunity for the existing and even new players. Still, consolidation in this space is imminent. In the next couple of years, we will see mergers and acquisitions; some OTT platforms will shut shop, smaller players will pivot and produce content for larger players, instead of building their B2C platform.

Amazon and Apple TV channels will become popular. Once big distribution platforms are established for OTT subscriptions, to negotiate better rates and launch subscription bundles, OTT platforms may collaborate the way Star TV and Zee collaborated to form Media Pro.

Similar to the TV industry, even in the VOD market, there won’t be a single winner, but multiple leaders as different OTTs cater to different audiences. For me, the service that I choose to launch when I am not sure what to watch is the winner. Because of the extensive content library and my affinity towards documentaries, Discovery+ and Netflix pass the toothbrush test and are my preferred services.

The author of this article Aadeesh Rajeev Deshpande is AVP - Alliances & Partnerships, ALTBalaji.

The views and opinions expressed in this article are his own, and not of the employer.