Video On Demand – Changing The Video Consumption Landscape

In the early 90s, people had the habit to adjust their schedules to watch Ramayana or Mahabharata program and during the telecast, they used to watch the idiot box religiously, being glued to the screen without any scope for household or outside chores. However, in today’s digital age, people find it extremely difficult to adjust their schedules for a program or a movie and are moving toward services (such as VoD) which bring the content to them, enabling them to watch their favorite content at their convenience, regardless of time, place, and device.

Market overview
Consumption habits of the users have changed drastically over the years and VoD has established itself as one of the most popular services delivering video content to end user devices.

A lot of service providers have started leveraging this shift and have launched video platforms to facilitate online content viewing.

Hulu has recently announced a growth of 30 percent YoY having crossed 12 million subscribers, while Netflix and Amazon prime claim to have 75 and 50 million subscribers respectively.

The global VoD service market was valued at USD 45.03 billion in 2014 and is expected to grow at a CAGR of 8.3 percent during the period of 2016–2026 while the Indian market is growing at a whopping 23 percent CAGR.

The Indian market is completely driven by advertising where subscription contributes to only 3 percent of the overall video revenue; however, the subscription revenue is forecasted to grow 9 percent till 2020. The young population in India spends a lot of time watching online content and contributes to a whopping 75 percent (15–34 age group) of the total online video consumption in India.

The rise of video consumption in India
With the ever-increasing penetration of smartphones and cheaper and faster data services, internet consumption is rising in India at an exponential rate and so is the video consumption via VoD service. Since the foray of Jio into the cellular service market in India, data prices have been slashed drastically. This enabled users to consume data at a much cheaper rate, feasible for watching video content on the internet.

Major video content distributors have also made all of their linear offerings available in the form of VoD content, available to users at any point of time. This VoD offering is available to users mostly free of cost as far as subscription is considered, as part of their initial market strategy. This, combined with cheaper data rates and multiple other factors that VoD service offers, drove the users to watch online content at a much frequent rate and paved the way for the ever-growing VoD market in India.

Citing this paradigm shift, a lot of advertisers have also come forward to start advertising on digital platforms mostly serving VoD content via pre-rolls, mid-rolls, and sponsorship tags. This has enabled content providers to consider AVOD as the premier revenue model for content monetization, making the content available to a much large consumer base.

The launch and success of Amazon Prime and Netflix platforms in the Indian market also paved the way for Indian broadcasters to come forward with revamped and more appealing OTT applications with in-house productions in the form of original content to capture the ever-growing VoD user-base in India.

Key drivers for the success of VoD
VoD was introduced to users as a service that offered subscription-based online movies which have been transformed into one of the most popular ways people consume content. VoD services have been gaining popularity among the user because of multiple reasons such as:

Changing viewing habits of consumers. In today’s era, time is of extreme importance and a scarcity, especially when it comes to the young crowd. This drives them from traditional content delivery services toward internet-based streaming such as VoD, which facilitates content serving to their portable devices directly, enabling them to watch their favorite content at their convenience, making it extremely popular among them.

Strong user recommendation engines. One of most effective, but, overlooked service which contributes effectively maintaining the user engagement on the platform. Nowadays strong recommendation engines analyze the user’s activity across the platform on a number of parameters and present them the content of their choice.

Availability of quality content online. The platforms offering VoD services such as Netflix and Amazon have introduced a lot of original content which is produced in-house and is gaining tremendous popularity among users. These platforms are equipped with millions of popular movies and TV shows which are made available to users on a single platform without the need of switching the screen to watch their favorite content.

No need of a dedicated infrastructure/network. Unlike traditional cable TV, VoD does not require a dedicated network/infrastructure or in simple terms a wired connection to receive the stream.

Considerably lower subscription charges. Majority of the VoD services are available to the users in a freemium/hybrid model, allowing them to watch their favorite content with few advertisements, without any subscription charges. Platforms like Voot and Sony Liv allow the users to watch the episodes on OTT platforms which were broadcast in the linear channels without any subscription charges in order to get the undivided attention of users.

Relevant ads. With the introduction of user-personalized ad-targeting using CSAI and SSAI technologies, the user is now being presented with relevant ads based on his interests and demographics data which ensures user engagement to the max possible time-span even when the ads are being served.

VoD revenue models
Over the years, VoD services/platforms have seen exponential growth and have completely disrupted the traditional broadcasting market offering linear streams over CATV or IPTV. There are multiple revenue models in play to support effective monetization of these VoD services as listed below:

Premium/subscription-based model. A monthly subscription is levied on the users to grant access to the entire content bouquet. This caters to a niche category of users willing to pay the right price for premium content with a minimum monthly commitment. Popular examples of this model are Netflix, Hulu, and Amazon Prime.

Transactional/pay-per-view model. Commonly known as pay-per-view, transaction model was one of the legacy model VoD services were offered with, in the initial phase. In this model, end-users do not have to opt for a monthly subscription and rather pay for the content they choose to access. iTunes is one of the most popular platforms which has adopted this model.

Ad-based monetization model. This model grants free access of the entire content bouquet to the users and generates revenue by incorporating in-stream advertisements and other promotional brandings. This model caters to users who are willing to watch a few advertisements served in between their choice of content.

Freemium/hybrid model. The hybrid revenue model enables content owners to offer different price packages to its customers. Pricing packages can range from paying on a transaction basis to signing up for a subscription. Catering to a vast majority of users, this model serves every end-user effectively. YouTube has adopted the hybrid model, offering few services with pay-per-view, while most of the catalogue is ad-supported.

• Applicability of these model in a certain region depends on a lot of factors such as:
• User spends statistics on online video content per region;
• End-user demand statistics for premium/ad-supported content;
• The popularity of the content being offered (region specific); and
• In-house productions a.k.a original content.

The future ahead
VoD streaming has gained immense popularity in the last few years, especially with the freedom, flexibility, and convenience these services come at. Low cost is another factor that has gained viewers’ attention toward these services as compared to bundled TV services where you pay a huge monthly fee to access the content of someone else’s choice. Though there are multiple benefits of this VoD over the traditional content delivery mechanism; there are several areas that have to be worked upon to maintain the user engagement and reduce the churn to a minimum.

• Rich user experience (UX);
• The accuracy of content metadata;
• The availability of rich content metadata;
• User targeting for ad and content serving;
• Keeping pace with new devices and platforms; and
• Network infrastructure to deliver higher speeds.w

According to a report, in the next 5–7 years, VoD services combined with OTT streaming technology are expected to replace the traditional video delivery mechanism, completely changing the video consumption landscape across the globe, bringing in a big shift.