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Why it makes financial sense to explore online video distribution for films

Subin Subaiah
19th Jan 2018
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Streaming services are likely to change how we watch movies. Hindi film majors are embracing digital technology to a greater degree than ever before, moving towards an on-demand world to allow streaming in a month or two after a movie release.

The trend of online streaming is likely to thrive due to easy access and affordability

Since the cable TV revolution in the 90s, people have been hooked to the television. But, times are changing again. Today, fast broadband connections have opened up avenues for on-demand video streaming. How we watch online video is also evolving.

Mobile viewing has been growing steadily for years, and accounted for 55 percent of all mobile data traffic in 2015, according to Cisco's Visual Networking Index.

Typically, you paid a large blanket monthly fee for the cable service and got a bunch of channels you never watched, but now it is a lot easier to pay for exactly what you want to watch.

That’s why a pocket of users in India in larger cities are giving up their cable connections, and exploring options with on-demand video streaming services.

The year 2015 was the tipping point for the media and entertainment (M&E) industry in India.

The development of payment technologies, increased penetration of mobile phones, growth of video and audio streaming platforms, and the much-anticipated rollout of 4G services began last year and promised to gather pace in 2016.

The FICCI- KPMG 2016 report states that the M&E industry in India is expected to grow at a compound annual growth rate (CAGR) of 14.3 percent to Rs 2,260 billion by 2020, from Rs 1,158 billion in 2015.

This growth will be led by advertising revenue which is expected to grow to Rs 994 billion (from Rs 475 billion in 2015) at a CAGR of 15.9 percent. According to analysts, Indians consume around 750 MB of data per user every month. This indicates the huge business opportunities for VOD players.

An MPA report adds that India’s OTT video subscriber base is expected to grow to 105 million by 2020. Such projections explain why OTT firms in India are betting on this market.

With growing interest from traditional TV broadcasters, film producers are currently leveraging this opportunity to port existing TV content and movies to digital platforms, and launch their own OTT platforms. According to a Media Partner Asia (MPA) report, India had 12 million active OTT video subscribers in 2014. And given the launch of more than half-a-dozen personal entertainment apps from large media houses since then, the number of subscribers has been steadily increasing.

The Cellular Operators Association of India (COAI) had said earlier that internet penetration has been increasing rapidly in the country; 3G users in India are expected to double (to 330 million), whereas 4G users are pegged to grow ten-fold (to 42 million) by 2017. A 2016 Frost and Sullivan market insight report on the Indian OTT market indicated that are about 66 million unique connected video viewers in the country every month, and roughly 1.3 million paid video subscribers.

The impending radical changes in technology could alter the dynamics of the movie business. The first casualty was the VCR, then CD, then DVD, then Blu-ray. The next is likely to be TV. The growing market for mobiles and 4G that can play videos is likely to bring the change—not just in the market but also in consumer behavior.

For instance, because of mobiles, entertainment is becoming more a solitary pursuit than the social activity it was in the past. Revenue from multiplexes will still be important, but over time, people are likely to move from watching movies on TV to want to watch movies on mobiles. The trend of online streaming is likely to thrive due to easy access and affordability.

Digital medium comes at no cost for a movie producer. It cuts through all the middlemen, and the content directly reaches the viewer through a device, or multiple devices in some cases.

Piracy, however, remains a huge challenge, not just in India, but worldwide. Hollywood loses hundreds of millions of dollars due to piracy each year, and India’s massive entertainment industry suffers just as badly. With content producers focusing on digital premieres of their movies, piracy can be contained.

Together, the combination of affordable devices, affordable access to online content, availability of original content and millennials’ preference for personalised media and entertainment is driving growth in OTT.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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