Vidya S. Nath, Research Director-Digital Media Practice, Frost & Sullivan
Amazon India launched its Prime Video service mid-December fuelling excitement in Indian media about over-the-top (OTT) or multiscreen video-on-demand (VoD) through mobile apps and web-based platforms. Every single day in the last 12 months, there has been news about the OTT video market. Over just 15 months, we have seen the competitive landscape explode to about 30 OTT service providers. There were nearly 10 investments in OTT and OTT technology companies over the year, and competition is heating up in terms of who is acquiring the exclusive rights to Hollywood television series and movies in the first pay window. Millions of rupees are being invested into content production and acquisition by all major brands.
Even as the market landscape heats up with competition and a variety of choices for consumers, the race to the top in India will be challenging. This is an insight based on Frost & Sullivan’s findings on how an OTT company can find a sweet spot to succeed in this crowded space.
India Is a Huge Market Opportunity, or Is It?
On a daily basis, we find OTT service providers claiming viewership in tens of millions, with little details on whether these are unique viewers or just registrants. Frost & Sullivan finds that consumers are highly fickle in India. While they jump on to a site and track it in the first few weeks, they are prone to jump to alternatives soon. According to Frost & Sullivan, there are about
70 million unique connected video viewers in India, and about 1.3 million OTT paid-video subscribers. However, OTT video subscription numbers fluctuate dramatically every month. India’s leading broadcaster, OTT company Hotstar, claims to have 5 million viewers on a regular basis which could balloon to 100 million during the IPL season, nationally and internationally.
The success of an OTT service provider depends on the extent of high-speed broadband connectivity in the country as well as the fragmented demography that India provides as an opportunity. Most of the companies today offer easy-to-provide content in English or
Hindi, and while most of them have a plethora of attractive content from other regions, there is little familiarity for the Indian consumer to be hooked on to the platform.
In many ways, the OTT service providers in India use a top-down approach for capturing their base. The tremendous pressure from competition prods them to rush through their content sign-ups and strategy.
However, the long-term success for this market will be to use a bottom-up approach to ensnare every segment of the Internet-savvy population.
Much has been written and deliberated about the millennials in India, the population that comprises 40 percent of the total population, and are between 18 and 35 years of age. Facebook found that in 2015, 90 percent of its users were below 35 years of age, comprising a base of about 104 million. Many OTT companies find this demography attractive and are steering their content strategies to target the same. However, India’s multi-lingual population requires diversity in content by language. While Hindi is one of the official languages of India, over 60 percent of viewers in India watch content on television in non-Hindi.
The value-add for OTT service providers in India comes from its expat population in multiple countries. One of the reasons for the early success of Netflix in its early days as a video-rental company was its ability to provide videos in native languages to its subscribers, including many of non-US origin. OTT providers today realize that while India has a large number of viewers, its paying customers are abroad. Multi-regional rights to content will be a moot point for consideration for driving a higher adoption of OTT services.
Customer Experience and Digital Marketing
The launch of OTT in India has been a boon for traditional media such as print and television. The way e-commerce ad spending boosted advertising revenue from 2014 to 2016, OTT will have to similarly spend significantly on brand building and awareness about its content offerings through publications and television. According to our estimates, for every dollar spent on content acquisition (either through licensing or production), OTT companies will need to spend at least half that amount on customer acquisition marketing strategies to drive viewership grabbing in the next two years. Integrating their videos with popular social media channels such as YouTube, Facebook, and Twitter is a must-have strategy to capture mindshare among targeted audiences. Yet, it will not be effective by itself to capture a mass viewership base.
The key to success in the OTT domain is to wean the consumer to the site and keep her/him hooked on to it for as long as possible to create recall value for a possible re-visit. OTT service providers have a significant challenge in creating a powerful user experience with a suitable user interface and indexing and meta-tagging of content, recommendations, feedback, and suggestions. Today, VOD is dependent significantly on a consumer’s ability to know what she/he is looking for. However, to create a viewing habit of consuming VOD, OTT platforms need to re-engineer a way a consumer starts to think of videos and selects them. Instead of selection by choice, OTT has to depend on selection by recommendation.
In many ways, OTT will require to mirror e-commerce websites and their customer experience. However, platforms in India are yet to figure out the formula of user interfaces (UIs), before they can make it a desirable experience.
“Video, Video Everywhere, but What Should I watch?” – In Pursuit of Content Partnerships and Originals
In the first study on OTT India market in early 2016, Frost & Sullivan had predicted that it was a rosy and prime time for growth for the indie filmmakers and boutique content producers. After the valuation success of The Viral Fever riding on the back of YouTube, several content companies are eyeing partnerships with Netflix, Amazon, and Hotstar.
OTT platforms are competing today on price and the variety of content. They strongly believe that a vast library can help them to keep customers on their sites and apps. However, non-broadcast companies want to replicate the model of producing originals as done by Netflix in the USA to have rights to content of their own, based on the audience they intend to target. While OTT platforms are purchasing older content from the likes of Shemaroo and Yash Raj Films to create an exhaustive library of choices, their focus is now moved to creating attractive content. If any gap exists today in the market, it is in the number of choices that non-Hindi and non-English viewers have on majority of these platforms.
It will take another 6–8 months to understand the pulse of the online viewers and their content preferences. OTT service providers are required to invest in strong analytics solutions to understand viewership behavior in India and how it differs from the snacker to a couch potato.
The Big Elephant in the Room: YouTube
YouTube, by far the largest OTT company in India (as in many other countries), continues to be the biggest driver for multiscreen viewership in India. Its evolution from that of a user-generated content provider to that of a professional content aggregator has stimulated OTT viewership behavior. Most OTT service providers will be unable to deny or compete with what YouTube has to offer.
Leading broadcasters in the world have started to use YouTube effectively to market their content and pull their viewers to their home-grown websites and apps. YouTube, however, has some disadvantages as its recommendations do not always suit family choices and its ad-insertion can sometimes be an irritant for viewers. Yet the company has effectively been able to make itself a universal first choice for OTT viewers across all media – mobile, PCs, tablets, and even HDTVs. It could leap into a new generation of content in the long term.
Conclusion and Top Predictions
India joins the West in its pursuit of a new generation of video viewers – the cord shavers and the cord-nevers. There are 30 OTT video providers in India today and the market will continue to grow as more broadcasters and pay-TV operators enter the market providing their television content on multiple screens. While today monetizing the OTT platform is not as high a priority as getting a million-plus viewers to sign up, the journey toward this is riddled with challenges. Frost & Sullivan expects that we will possibly see an aggregator of all video OTT apps in late 2017 and 2018, and significant consolidation in the market by 2020.