Is Indian streaming video market headed for a shakeout after Covid-boost?

This November, Lionsgate, the studio behind Orange is the New Black and Mad Men, will go direct to Indian consumers with its pay service
Is the Indian streaming video market due for consolidation?

In June this year, 60 over-the-top, or OTT, services were fighting for the attention of India’s 662 million broadband consumers. Just five years ago, their number stood at 15. Media Partners Asia (MPA) estimates that investment in programming by OTTs more than doubled from $260 million (Rs 1,690 crore) in 2017 to $600 million (Rs 4,320 crore) in 2019. And there are still some biggies walking in.

This November, Lionsgate, the studio behind Orange is the New Black and Mad Men, will go direct to Indian consumers with its pay service. “Lionsgate is not the last. Many large players are still coming in,” says Rohit Jain, managing director, South Asia, Lionsgate.

The timing seems off. The pandemic-fuelled surge in viewership brought a bounty only for some players — Netflix, Amazon Prime Video and MX Player, according to Comscore data. YouTube held steady, while every other major OTT saw a fall even as viewing time went up. In June, the total audience for streaming video remained stagnant at 395 million, same as on December 2019. While advertising fell across the board, subscription numbers grew from 10 million before Covid-19 struck to over 31 million in June. MPA estimates that overall streaming video revenues will grow at 9 per cent this year instead of the 30-40 per cent in the past. The signs of stress are apparent: Budgets are being trimmed and at least three of the smaller OTTs are reportedly in talks for selling out.

The biggest OTT in India — Google’s YouTube, with 388 million unique visitors — reaches over 98 per cent of the 395 million people who watch streaming video. Next comes the Times Group’s MX Player at 148 million. Disney+Hotstar is third, with just over half of MX Player’s numbers. After that the numbers fall steadily to low double and single digits.

“For consolidation, it is important to have some sort of synergy and scale,” reckons Jain. This is the first issue with any talk of consolidation in the Rs 8,000 crore OTT industry.

Where is the scale?

The Rs 79,000 crore TV business is ten times larger and more profitable. It reaches over 836 million viewers. Five large players — Disney Star, Zee, Viacom18, Sun and Sony — account for over 63 per cent of the total viewership and roughly half the industry revenues. The largest, Disney Star, is about Rs 18,000 crore in topline.

On the other hand, YouTube, the largest OTT, has revenues estimated at Rs 3,000 crore, bringing it close to the smallest of the big five — the Rs 3,782-crore Sun network. Except for Disney+Hotstar (Rs 1,113 crore), Netflix (Rs 750 crore) and Amazon Prime Video (Rs 1,500 crore), all others are in the estimated Rs 50 crore-Rs 150 crore range. Till individual OTT players hit, say, 100-200 million viewers each, ad rates, subscriptions and, therefore, revenues will not catch up. As one analyst says, “OTT has to hit the scale of TV.”

To be fair, television took over 20 years to reach this kind of scale. Given its rapid growth in three years, OTT will probably get there faster. More importantly, it is the television industry that will help OTT reach scale — for two reasons.

One: As Tarun Katial, CEO, Zee5, says, “Eventually VoD (video-on-demand) will land on TV (screen). The price point of a smart TV (internet enabled) is down to Rs 7,000. Add to that broadband availability. In the next 18-26 months, long-form entertainment will increasingly move to TV.”

He cites the US example where a bulk of OTT viewing is on TV screens. In India, Smart TV penetration jumped to 20 million in the 197 million TV owning homes earlier this year. Much of it was driven by the sampling of streaming video on TV screens during the lockdown when fresh programming was absent. This will only increase.

Two: Some of the biggest OTT players in India come from broadcast firms (Zee5, Disney+Hotstar, Voot). More than 50 per cent of the viewership on OTT is catch-up TV. When YouTube came to India in 2008, almost every major broadcaster dumped its episodes online. “A lot of the TV guys were focused on catch-up TV and sport,” says Sameer Nair, CEO, Applause Entertainment. He adds, “The pivoting happened in 2016 because of Amazon Prime Video and its original shows. From 2017-2019, things shifted from catch-up TV on OTT to OTT originals.”

Yet, “the biggest shows on Star Plus will be the biggest shows on Hotstar. Ditto for Zee5 or Colors. How strong your content is on TV is the defining factor on OTT,” reckons Kedar Gavane, senior vice president and head APAC, Comscore.

Of the top 10 Indian OTT brands, only three are technology firms. The rest are backed by studios or broadcasters. “There are two kind of OTTs — tech driven and studio driven. A lot of companies in between will find it difficult to survive,” says Jain. “Like with satellite TV in the 1990s, a lot of people will get in. Some will succeed, some will consolidate,” adds Nair.

Besides revenue growth, the big challenge is the need for an aggregator as apps multiply and everything becomes a walled garden. “There is real need across OTT distribution to create Hulu and Roku type platforms in key markets,” emphasises Vivek Couto, executive director, MPA. So far telecom operators, and maybe Netflix and Amazon Prime Video, have played that role in India.

Like other apps, OTTs can take up only so much space on the TV, laptop or phone screen. Just like a Tata Sky or a Hathway helps aggregate and bundle offerings, some form of aggregation is imperative. Or else the market will explode into the cacophony that TV became at one point.

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