Online video in India, a US$213 million business by advertising and subscription revenue, has a long road to travel before it transforms the country’s much larger US$9 billion market for pay-TV.
Nonetheless, early examples and responses to this far-off disruption are already becoming apparent.
Premium pay-TV channels, such as India’s US$200 million TV market for English general entertainment, are among the first in the firing line.
Star, India’s biggest broadcaster, has unveiled its first paid-for tier for its streaming service Hotstar, offering HBO’s original dramas uncut, including simultaneous access for new releases, for Rs199 (US$3) per month.
That’s an earlier window for HBO content than Star’s English GE channels, Star World Premiere, which carries a censored version of HBO shows around 36 hours after the US debut, and Star World, which airs older shows.
This follows a similar push by Star for premium online cricket rights. These have been a major audience driver for 14-month-old Hotstar, which had been supported solely by advertising.
Such acquisitions could signal a move to further diversify OTT revenues, a segment arguably more suited to targeted interests rather than mass entertainment at this early stage of development in India.
Wider access to high-speed broadband should, in turn, reshape the economics for other niche genres. Viewing time for kids and lifestyle channels, for instance, is limited in a country where most homes have just one TV.
Viacom18, another major broadcast network, has developed a dedicated section for kids in its online video platform, a recently launched ad-supported offering called Voot.
Viacom18 executives are banking on a focus around youth-oriented fare, including reality and comedy shows, to help Voot overtake existing services from other broadcasters, which are more focused on general entertainment.
OTT AND DIGITAL TV
India remains a massive growth market for multiple media, where smaller genres with dedicated audiences were supposed to be energized by the arrival of digital TV.
Extra channel space provided by DTH and then digital cable promised to incubate new price tiers and business models for niche and premium content.
India’s TV renaissance is lagging behind however, bogged down by revenue disputes between cable operators and channel providers.
Half of Indian pay-TV homes, mainly in the country’s biggest and richest cities, now subscribe to a digital pay-TV service, representing around 70 million households.
A small affluent segment will also have high-speed fixed broadband, rising from about 4.6 million households this year to about 17.7 million by 2021 (excluding lower quality ADSL networks).
That opens up viewing options, as well as opportunities for content monetization.
Earlier this year, two of India’s biggest DTH operators, Tata Sky and Videocon d2h, announced plans for set-top boxes that can connect to the internet, starting with their top-tier customers.
It’s a strategy deployed by DTH operators all over the world, to make up for the lack of two-way connectivity that digital cable enjoys, and facilitate on-demand viewing.
“DTH companies realize they need to be ready, as and when broadband penetration grows,” observes Mihir Shah, VP of India for industry consultants Media Partners Asia (MPA).
“Tata Sky and Videocon are both gearing up to launch connected boxes,” he adds.
It’s all part of a broader and increasingly visible engagement in OTT by traditional pay-TV platforms.
“You have Hathway and other cable operators looking to integrate OTT services with their broadband,” Shah continues.
“You will see a lot of hybrid distribution and hybrid products in urban markets, 12 months down the line.”
MPA’s latest forecasts – published in a new report, Asia Pacific Online Video Distribution 2016 – portray India as a huge market for online video, rich with potential.
Even though the country has the lowest broadband penetration among APAC’s 14 biggest economies, its OTT video market, measured by combining advertising and subscription revenue for standalone services, is already the fourth-biggest in the region, behind China, Japan and Australia.
KEYS TO UNLOCK SVOD
How incumbents and challengers in India adapt to online video’s myriad challenges and opportunities will be a long, ongoing journey, shaped by government regulation and consumer comfort with online payments, as well as falling costs for mobile data and the production of online content.
Despite an anticipated explosion in high-speed connectivity, on course to reach 622 million mobile broadband subscriptions by 2021, SVOD revenues in India are only expected to total US$125 million in 2021, less than 2% of the country’s projected subscription revenue for pay-TV.
Online video advertising will fare better, passing US$1 billion in net revenue in India by 2021, according to MPA analysts.
Two tech titans however, Google and Facebook, will take a whopping US$617 million slice of that pie between them, a 58% share, leaving US$510 million for everyone else.
Nonetheless, it’s still an improvement on India’s lopsided online video market today, where YouTube alone gobbles up around 80% of ad spend.
TV companies can take the fight back to YouTube and Facebook, Shah suggests, by making more original online productions.
Star is already experimenting in this area, working with comedy group AIB, who gained fame through YouTube, to air their shows on Hotstar first, ahead of linear TV.
It’s going to be a drawn-out but potentially rewarding transition, initially gravitating to one-off purchases of short-form content before online video subscriptions become a mass proposition.
Indian production houses however, historically restricted to churning out mass market programming, would leap at the chance to showcase their creativity, Shah contends.
“The current AVOD players have not yet significantly exploited exclusive content on OTT, which can then possibly command sponsorships or much higher CPMs,” he says.
“Maybe three to five years down the line, people will have created franchises and a large following and exclusive content for OTT,” Shah adds. “Then you can start exploiting SVOD.”