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Over the Top (OTT) – Streaming Video on Demand (SVOD) Market In India

Streaming service providers in India have experimented with different models, such as investments in local and regional content, bundled offerings.

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VoicenData Bureau
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Streaming service providers in India have experimented with different models, such as investments in local and regional content, bundled offerings, tiered pricing, and hybrid models with varying degrees of success

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The India perspective - OTT

With a diverse population of more than 1.3 billion that speaks over 20 major languages and consumes a variety of domestic and international content, India is a market that plays by its own rules.

Affordable data and low-cost smartphones fueling customer demand, the Indian customer can purchase short-term subscriptions and switch service providers to get the preferred content across the calendar year. Therefore, the mere adoption of successful streaming strategies from other markets will not be sufficient for streaming service providers to win a wallet share in this high-volume, low-ARPU (Average Revenue Per User) market. We explore some key themes and trends affecting the Indian streaming provider space.

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The Indian OTT market currently makes up only 7−9% of India’s entertainment industry. However, the OTT space is expected to grow at a CAGR of more than 20% to reach US $13-15 billion over the next decade.

The pricing war intensifies as regional players challenge the dominance of the Big 3 – Amazon, Netflix, and Hotstar. The market for providing video streaming services in India is highly fragmented with more than 40 streaming players vying for the customer’s wallet.

Global streaming service providers (such as Amazon, Disney-owned Hotstar, SonyLiv, and Netflix) compete with domestic service providers (such as Zee5, Voot, and MX Player), as well as a host of regional and ultra-localized players. Demand for OTT streaming content based on geodemography is on the rise, both within India and internationally from the considerable Indian diaspora.

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India is witnessing a boom in regional content and platforms created to address this demand. The share of regional language consumption on OTT platforms is expected to cross 50% by 2025 from 30% held in 2019, easing past Hindi at 45%.

The broadening of the traditional audience in the streaming space, the popularity of international content (such as Korean or Spanish content) in India, and the ability to attract a wider audience through subtitles and dubbed content have made established streaming service providers revise their strategy for the Indian market.

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In December 2021, one large streaming player slashed prices by up to 60% for its monthly subscriptions (prices for its basic monthly plan dropped from INR 499 to INR 199).

On the other hand, two other global players also marginally hiked their monthly subscription rates, after finding a footing in the Indian market at highly competitive rates to attract a broader set of customers.

Most major streaming players have launched mobile-centric plans targeting price-sensitive millennials and Gen Z customers. These plans also capitalize on low data rates (US $0.09 per GB) and a widespread smartphone user base (more than 600 million) in the country.

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Pricing for streaming services will remain competitive as players attempt to stabilize and consolidate their customer base while minimizing the risk of churn to other services.

Market consolidation

With more than 40 players operating in the streaming space, streaming service providers compete to ensure a continuous supply of exclusive yet affordable content. However, consolidation of service providers is expected as the market matures.

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This trend has also been seen in the US, where the blurring of lines between tech and the different branches of media has made the entire space ripe for deal-making.

The recent acquisition of MGM by Amazon, the respective mergers of Warner Media and Discovery, and Viacom and CBS are expected to be just the beginning.

In India, the recent merger of Sony Pictures and Zee Entertainment, which will create an entertainment behemoth, may just be the first domino to fall in a chain reaction of consolidation. The recently released government guidelines for OTT content can further accelerate the market consolidation, requiring OTT platforms to adhere to the same content rules followed in the TV and print industry.

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These new guidelines are expected to establish a level playing field for the entire media industry and could force niche platforms that rely on objectionable content to shut down. Other segments in the media industry are also expected to witness consolidation in the near future as they look to shore up their defenses and strengthen and grow with the OTT-driven push in the space.

App Aggregation and Bundling

Each paying customer in India has, on average, 2.4 subscriptions.

However, given the price sensitivity, Indian customers may not continue to pay for multiple OTT streaming services. App aggregation and bundling can play an important role in expanding the market by bringing considerable value to consumers in terms of affordability, useability (single sign-on, single-window content discovery, etc.), and compatibility with existing devices.

It also helps DTH and Telcos remain relevant by capitalizing on this trend, with each major player launching aggregator platforms and partnering with smaller streaming services to help improve their reach and broaden the content available for their customers.

Ad-based Video on Demand (AVOD) vs. Subscription Video on Demand (SVOD) debate

While the early stage of the Indian OTT scene was dominated by AVOD pricing structures to maximize consumer acquisition, bundling and pricing innovations and the availability of premium original content have driven increased SVOD adoption, especially during COVID-19.

India currently has about 102 million SVOD subscribers; this number is estimated to increase at a CAGR of ~17% to reach 224 million by 2026. However, AVOD is expected to continue to pull in more revenue than SVOD, increasing its current rate of US$1.1 billion in 2021 to the US $ 2.4 billion in 2026. Over the same period, SVOD is expected to grow from its current US$ 0.8 billion to the US $ 2.1 billion in 2026.

SVOD subscriptions may also be affected by the bring-forward effect of COVID-19 as the currently accelerated growth rate may taper with the pandemic subsiding.

The content arms race

OTT players across the spectrum are investing heavily and churning out content to attract a greater viewership and better penetrate the market in OTT’s growth stage. The pandemic further acted as a boon for streamers as the closure of cinemas forced content owners to look at online distribution platforms. This led to a content acquisition spree as big-budget Bollywood and regional films were snapped up by the highest OTT bidder, and marketed and released to much fanfare. OTT platforms invested the estimated US $ 665 million in content in 2021, with Netflix, Amazon Prime Video, and Disney+ Hotstar leading the pack with a combined spend of ~US$380 million.

Others, led by the Zee and Sony combo, are also gradually scaling their investments as they aim to catch up.

The linear TV dilemma and the way forward

The OTT market currently makes up only 7−9% of India’s entertainment industry. However, the OTT space is expected to grow at a CAGR of more than 20% to reach the US $13-15 billion over the next decade.

This growth will be driven by heavy investment in original content, pricing innovations, low data costs, and the rise of short-form content. However, this progression from the early stage to the mass stage might come at a cost to the broader media industry as subscribers, especially in tier 1 and tier 2 cities, may switch to streaming platforms from traditional linear TV.

Although India has largely escaped cord-cutting for now as TV viewership is on the rise, the industry cannot afford to become complacent. Linear TV players need to learn from OTT platforms, provide meaningful and quality content, and integrate the latest technology, such as connected TVs, to remain relevant in the new digital world.

Churn is Accelerating in the Streaming Video on Demand (SVOD) market globally. More choices, better pricing and varied content is driving this in all markets.

The Bottom Line

Streaming service providers in India have experimented with different models, such as investments in local and regional content, bundled offerings, tiered pricing, and hybrid models with varying degrees of success.

With the streaming market expected to reach US$13-15 billion over the next decade, it is safe to say that “the rising tide lifts all boats.” Streaming service providers are reaping the benefits of a continuing pandemic, shifting content consumption priorities of the customer, and disrupting linear TV services. In this rapidly evolving market, streaming players focus more on customer acquisition as opposed to customer churn. As prices stabilize and content libraries become nuanced and structured, the focus will shift to churn minimization.

Core to that effort will be the sustainability of the content pipeline and the ability to remain affordable as the market matures.

Extracts from Deloitte TMT Predictions 2022.

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