Netflix may still seem an expensive proposition for the price-sensitive Indian market. But with OTT models and consumer behaviour changing, will Indians make the shift to paying for digital content?
The battle for eyeballs is heating up, and over-the-top (OTT) service providers are rushing to use all the ammo they have as they chase a win. With close to 25 percent of Indians consuming content digitally and an internet penetration growing at 20.26 percent, OTT providers are focusing on doubling the 250 million Indian video viewers, according to an EY-
There’s no doubt that Indians love watching entertainment online. According to App Annie, Indians love video streaming. In 2018, Indians spent a whopping 47 billion hours on the top five streaming apps.
A report by The Boston Consulting Group (BCG), ‘Entertainment Goes Online’, currently pegs the Indian OTT market at $50 million. The growth is attributed to increasing affluence, the rise in penetration of data in rural areas, and adoption across demographic segments, including women and older generations.
Manish Agarwal, Business Head of Zee5 India, says that with this growing penetration of internet in the country, the market for OTT platforms like ZEE5 and others is high. “It opens avenues to capture a newer audience with differentiated and personalised content, as OTT platforms have the ability to provide personalised viewing,” he says.
A TRAI report published last month said the total number of internet subscribers touched 512.26 million as of June 30, 2018, compared with 426 million in 2016 before the launch of Jio.
Ajit Mohan, former Hotstar CEO, had reportedly said in a statement,
“I believe that IPL 11 has proved to be an inflection point for mobile as a platform becoming mainstream. The viewership numbers on Hotstar are a testimony that digital can be scaled like a mass media platform television.”
The BCG report says OTT market is expected to touch $5 billion by 2023. But all this depends on one thing - the willingness of the consumer to pay.
It also says that a whopping 82 percent of the market share is taken by advertising-based platforms (AVOD) like YouTube; the remaining 18 percent is shared by subscription-based (SVOD) and transaction-based (TVOD) platforms like Netflix and Amazon Prime Video. But things are expected to shift in the next four years, with more than 40 percent of the market going to subscription and transaction platforms.
An executive from one of the top analyst firms of the country, says, “The biggest differentiator that these platforms bring is the content type. Indian audiences are starved for differentiated content that these platforms bring, and to consume this they are more than willing to pay for the content.”
The freemium advantage
The lion’s share of the Indian OTT market has been taken by Hotstar. The StarTV-owned OTT platform is believed to have notched up 70 percent of video streaming app downloads. Voot is at 11 percent, Prime at five percent, and Netflix at 1.4 percent.
Sports streaming, regional content and Star network’s TV channels, may be one of the reasons for Hotstar’s dominance of the sector, but the freemium model the platform uses is a contributing factor. Hotstar offers users some content free of charge, and some paid for by a subscription (Rs 199 for a month and Rs 999 for a year).
On the other hand, Amazon Prime is available at Rs 999 for a year while Netflix’s most basic subscription plan comes at Rs 500 per month.
“India is a price-conscious market. It is, therefore, no surprise that most people share their subscriptions with friends, family, and sometimes even colleagues,” an analyst says.
This view was also verified by research done by Pixights, a specialist consulting and research firm, which did a survey on a cross-section of the population on the growing viewership of OTT and video content in India.
Boston-based Jana, owner of mCent browser, in its Video Streaming Services Report, stated that nearly 30 percent of Indian consumers plan to cancel their paid video subscriptions over free content. Of the surveyed users, over 60 percent said they only streamed free content from platforms like YouTube, MXPlayer, and Hotstar.
Netflix focus on original content
Despite this, the OTT revenue model for 2019 is predicted to double.
But whether a consumer chooses to pay for the subscription or not, content continues to be a deciding factor. This is what has led most OTT players to focus on original content.
In a conversation on the kind of investments Netflix is making in India, Michael Spiegelman, Vice President, Global Product Innovation, Netflix, says,
“Our content investment in India has scaled at a very fast pace. In fact, it’s been the fastest investment we have ever made in any country since we launched. This really reflects the richness of content creators we can draw on - the best of Indian storytellers to create high-quality original series and movies.”
A representative of Prime Video says with the option of ‘sharing’ available, many people are now opening up to the idea of paying for viewing content. At present, Prime Video allows two adults to share a plan and add-over for four child profiles. Netflix allows four people to share one account. People on these platforms can also sign in with different devices.
The Pixights report also discovered that Indians on an average spend Rs 295 per month on OTT platforms, and close to 62 percent of these people had subscribed to three or more such platforms. Some investors, seeking anonymity, said the space was difficult, but the push for content was currently driving investments.
But along with pricing what matters is getting the next 500 million users to pay.
“It is a question whether ‘Bharat’ will pay for viewing content online. While it might not be an immediate shift, it definitely will happen with time. What might work for now is a freemium model, giving viewers a tease and then adding more content,” the investor says.
(With inputs from Sohini Mitter)
Read more from our four-part series on how Indians are getting hooked to streaming videos online.