The stage is set; the warriors have warmed up and the battle for supremacy has started. Not all will emerge winners, but the blow must go on, as they say in Narcos, the popular drug drama on Netflix. Eerily enough, India's over-the-top (OTT) entertainment market closely resembles a Netflix trailer, especially a sequel entering a new season. Gone are the Hum Log-style family TV sessions and early YouTube days enjoyed by a lucky few with the device and Internet access (YouTube was not a pure-play OTT platform at the time and hence, not discussed here). A new season is on, with global giants Netflix and Amazon Prime Video investing crores to grow user base and load their content libraries with original productions as well as licensed regional movies and shows.
The American giants have certainly hit a home run but local players such as Hotstar, SonyLIV (we consider them local as both are registered and headquartered in India), Jio TV and ALTBalaji are not ready to give up on the home advantage and are loosening their purse strings to invest and get ahead. The outcome: As many as 32 OTT players and counting, and 200 million daily active streamers, all necessitating a strong need to differentiate content in a bid to attract eyeballs.
A recent study by the Boston Consulting Group (BCG) reveals that in CY2017, Netflix and Amazon spent around Rs 600 crore and Rs 500 crore, respectively; Indian players SonyLIV and Eros Now put in Rs 400 crore each and ALTBalaji invested Rs 120 crore for original Indian content. In the same year, both Amazon and Netflix had announced their plan to spend around Rs 2,000 crore each in the Indian market. Netflix's Sacred Games and Amazon's Mirzapur were among the Indian originals on which big money was spent. Both gangster sagas were instant hits and are now waiting for their Season II launches.
"India is going to experience a big explosion in terms of content and types of stories," says Gaurav Gandhi, Director and Head, Business, Amazon Prime Video India. "After our launch in December 2016, we have been growing steadily, heavily expanding our customer base, and are currently present in 1,000 Indian cities. We will invest more in local language content." Amazon launched five originals last year and currently offers content in six Indian languages, including Hindi, Tamil, Bengali, Telugu, Marathi and Kannada.
Gandhi says that the next big thing for Amazon is providing a local user interface (UI) for customers to search, navigate and browse in their preferred languages. "We have already introduced Hindi, Tamil and Telugu UI." Amazon thinks this will help add another 100 million Prime users from India.
Netflix, too, has scaled up its content investment in India at a fast clip. "It has been the fastest investment we have made in any country since we launched," says a company spokesperson. "Our content catalogue doubled in India since our launch, including original and licensed titles. We are drawing the best of Indian storytellers to create high-quality original series and movies," he says. After Sacred Games, the streaming giant has announced 10 original productions, including Ghoul, Lust Stories and Rajma Chawal. It also offers regional language movies such as Punjabi historical drama Chauthi Koot and Tamil thriller Visaranai. The company is looking to double its current team strength of 30 in India.
Homegrown players are also investing to expand their local and global content libraries. Hotstar, owned by Novi Digital Entertainment, a wholly owned subsidiary of 21st Century Fox's Star India, started its operations a year before Netflix made its India foray and currently boasts the highest number of viewers - 150 million monthly active users. The streaming platform reportedly received Rs 516 crore funding in July 2018 from Star US Holdings and is developing original content. As per the BCG report, the company invested about Rs 4,000 crore last year for the IPL cricket league rights. Hotstar also boasts the largest user base, primarily due to streaming of the IPL and the English Premier League. During the IPL last year, the platform recorded 10.3 million concurrent viewers. It has also partnered with HBO to offer the latter's most popular shows - Game of Thrones, Silicon Valley and Westworld.
Not to be outdone, Balaji Telefilms' digital platform ALTBalaji plans to invest up to Rs 500 crore over the next three years. "We are planning to invest around Rs 150-170 crore annually out of which 70 per cent will be spent to strengthen our content offerings," says CEO Nachiket Pantvaidya, adding that about 95 per cent of the content on ALTBalaji is original. "We are planning to launch 45-50 original shows in the next two years. We are investing in good quality content and aim to reach a subscriber base of more than eight million by 2021." As of now, the platform has more than 3.5 million paid subscribers.
In June 2018, Times Internet (TIL) forayed into the OTT market by acquiring a majority stake in Seoul-based MX Player for about Rs 1,000 crore. MX is quite popular in India with 350 million downloads and around 175 million monthly active users, as per TIL.
Viacom 18's Voot, which has access to all Viacom productions, is also bullish about content expansion. "In a multilingual and multicultural country like India, you have to provide the kind of content that suits consumers and their language preferences. We have around 6,000 hours of free content. But going forward, vernacular content will be driving the business," says Akash Banerjee, Senior Vice President and Head, Marketing and Partnerships. Voot has more than 100 million downloads and 45 million active users.
Voot's competitor Eros Now, owned by Eros International, is planning to invest around $50 million in original content while Zee entertainment's OTT platform, Zee5, says that the lion's share of its investment will go to its digital platform this year.
The OTT market in India is expected to see tremendous growth, according to global consultancy PwC. It is pegged to clock more than $800 million (nearly Rs 6,000 crore) in revenue by 2022 from about $300 million (over Rs 2,000 crore) in CY2017, which will catapult the country among the top 10 OTT markets. The BCG has projected a $5 billion market by 2023 with an additional 50 million paying subscribers. The growth over the next few years will be driven by rising affluence, an increase in the penetration of data into rural markets and adoption across demographic segments, including women and older generations, the report says. The recently released financial results of Netflix India confirm this trend. In its first full fiscal year of operations in 2017/18 - Netflix India was launched in January 2016 - the company reported a net profit of Rs 20.2 lakh on revenues of Rs 58 crore.
According to Raman Kalra, Partner, Entertainment, Media and Sports Sector, PwC India, consumers here love to build and control their viewing experience, based on their convenience and content preference. It is one of the key reasons for tapping into OTT players. "There is a shift from family viewing to individual viewing. People have different choices and OTT players cater to this demand," says Johnny Wu, Regional Director for Indian and European markets at LiveMe, a Chinese broadcasting platform that started its operations in India last year.
Sandhya Ganapathy, who loves watching videos on her smartphone, agrees. The 32-year-old from Bengaluru has subscribed to three OTT platforms, spends at least two hours a day streaming videos and rarely watches the telly. "It is convenient and there is a lot of quality content out there. Even my father-in-law, who is nearly 70, is addicted to these streaming platforms," she says.
Ganapathy is not a lone example. Studies reveal that more than 80 per cent users have up to three OTT apps on their smartphones and the market is moving fast. "Shortly, there will be consolidation, and we will see a few players with the lion's share of consumer base, content and market and a long tail of various players offering niche content," says Banerjee of Voot.
In a bid to push vernacular content and grow their viewership, global contenders Netflix and Amazon are signing content licensing deals with local production houses and other providers. Amazon is going to launch 30 more originals in multiple languages and targeting the mass market.
OTT players are also entering partnerships to scale up growth. For instance, Singapore-based HOOQ has recently tied up with Hotstar. The deal has enabled Hotstar to upgrade its Hollywood content significantly, while HOOQ can reach out to Hotstar's massive user base. "India is the most crowded, competitive and challenging market," says HOOQ CEO Peter Bithos. "We have a long-term market strategy here and need to invest heavily, maybe millions of dollars, for content and technology." HOOQ has struck deals with Vodafone and Airtel as well.
"Content partnership is also important for us," says Gandhi of Amazon. "Our deal with Excel Media, a Delhi-based production house, is a good example." Besides, Amazon has joined hands with companies such as Dharma Productions and Green Gold Animation, which produces children's series Chotta Bheem. Reliance-owned Jio TV has content partnerships with national and regional TV channels, including Zee Entertainment, while Netflix India has partnerships with Airtel Digital TV and Broadband, Vodafone, Tata Sky and Hathway, apart from content producers. It has also tied up with equipment manufacturers to prompt the inclusion of Netflix button on smart TV remote controls.
The industry has its share of challenges regarding growth and profit and regulatory intervention, and the latter could snowball soon. In November 2018, the Telecom Regulatory Authority of India issued a consultation paper to debate whether a regulatory framework is required to govern OTTs. Taking the cue, nine online video platforms, excluding Amazon, recently signed a self-regulatory code, drafted by the Internet and Mobile Association of India, an industry lobby group. While Amazon declined to sign the code, saying current laws are adequate, many lobby groups and OTT players are also against licensing or a fresh set of rules as a rigid framework could cripple competition against traditional broadcasters. However, experts believe that a better policy regulation will help the industry in the long run. "Regulation will help filter inappropriate content as long as it does not restrict talent and good work," says Wu of LiveMe.
While a regulatory storm can throw OTTs off-kilter, money matters are not looking up either. Hotstar clocked Rs 571 crore in revenues in FY2017/18 with a loss of Rs 389 crore. Other big players like Amazon are yet to become profitable. "We are currently focussing on expanding the customer base and scaling up," says Gandhi.
There is another hitch. The majority of Indian audience still prefers free or ad-supported content, and the AVoD (advertisement video on demand) model remains the key money-churner here, unlike mature markets where mostly SVoD (subscription video on demand) drives revenues. "Most of the Indian players with a huge customer base are on AVoD model now. To migrate to SVoD or freemium will be a challenge. It will take around three to five years for companies to make a gross profit," says Kalra of PwC.
That leads us straight to another crucial area - pricing. According to Kalra, "Indians are ready to pay, but they are very value sensitive. Also, we are a high-volume market. Companies who want to become a mass-market player have to price it right."
With its basic plan at Rs 500 per month, Netflix is the most expensive of all OTT platforms and perhaps the most successful in making money - Rs 20.2 lakh profit in FY2017/18 as per its RoC filing - as it has retained its subscription-based global revenue model even in India. In contrast, Amazon Prime, Hotstar and Zee5 are playing a volume game with low-pricing strategy. At a monthly fee of Rs 129 (annual subscription is Rs 999), Amazon offers access to Prime Video, Prime Music and free shipping on Amazon shopping app. Hotstar has a freemium model while Eros Now and ALT Balaji have cheap monthly plans at below Rs 50. Voot, however, offers free content. "We believe businesses are built when you play scale and are focussed on acquiring more customers. When you focus on subscription, you stop the scale of growth. However, we will be entering a freemium model in the next couple of months," says Banerjee.
The massive fragmentation of customer base across platforms is also an issue. "Acquiring a huge customer base will be a long-term challenge for OTT players. Eventually, customers have to decide to which platform they will subscribe," says Banerjee. Voot is planning to improve its machine learning skills and recommendation engines to ensure more traction but as the market expands, getting the right talent and technology becomes difficult. "Hiring the right people will be the key," he adds.
Ali Hussein, Chief Operating Officer of Eros Now, has a different concern - content piracy. "The cost of creating good content is very high. But content piracy is rampant here and it is taking its toll. The moment a good original is released, we see pirated versions on several channels. It hinders proper monetisation and revenue for subscription-based platforms."
The industry also requires deep pockets and big investments at this stage. "There is no market in the world which is as vast and diverse as India. Here, customers are extremely demanding and hungry for content, but they are also price conscious. So, creating content that will satisfy all will always remain a difficult task," says Gandhi.
The writer is a Chennai-based freelance journalist