Scope & Future of the VOD-OTT Era of Digital India
India has the fastest-growing media and entertainment market in the world. It is different from other markets in that it is set to maintain its momentum into the future. Many studies show that the Indian over-the-top and video-on-demand platforms (OTT platform) are growing significantly in the next few years. This growth is mostly driven by the growing trends in the areas of digitization and personalization.
How is Indian Entertainment Market Transforming?
India has traditionally been a TV-set household market. Some of the interesting facts about this traditional approach to entertainment include the following:
- All family members would spend time together to watch TV
- People subscribe to hundreds of channels even when they spend most of their time watching only a few of them
- Gradually, the modern viewer likes to watch their favorite programs at times that are preferable to them
This is where OTT platforms are gaining increased traction.
Indian OTT/VOD Market Growth Statistics
According to PricewaterhouseCoopers, the Indian video streaming market is expected to grow at a CAGR of almost 22% up to 2023, when it should be worth Rs. 11,977 crore. This is only a subset of the media and entertainment market that is expected to reach a whopping Rs. 4,51,405 crore, growing at 11.28%.
OTT is largely an unusual player in this market, but it is growing at a fast rate because it is allowing the Indian viewer to access TV entertainment on different screens on a budget. The viewer has become conscious about price and they have suddenly realized that OTT allows them to access TV and movie content through the Internet without the need to subscribe to traditional cable services.
The 2017, FICCI-KPMG report says that the urban viewer is the earliest adopter of OTT. The younger generation is the largest consumer. The report has also categorized the largest consumers of this new entertainment technology to be students, working professionals, and people who don’t own a TV set. This segment finds it much more convenient and better to consume movies and TV shows online. This also includes parents who are staying at home.
Scope of OTT Platform/ VOD Platform
The biggest OTT platform or VOD platform services in India include Hotstar, Amazon Prime, Netflix, ErosNow, SonyLIV, ALTBalaji, and Zee5. Some of the key statistics related to OTT consumption in the country are as follows:
- Counterpoint Research reports that 89% of viewers in India are under 35
- India’s 5 metropolitan cities account for 55% of all its OTT viewers, which means there is a massive untapped market that will fuel massive growth in the future
- Hotstar is the market leader in the Indian OTT market, as it has 300 million active users and 8 million paid subscribers
- ErosNow recorded the largest number of Smart TV viewers
- Xiaomi accounted as the most popular mobile device brand for viewing OTT content
- Around 2 in 3 people from the top 5 metropolitan cities consumed content on Amazon Prime and Netflix
As already mentioned, Hotstar is the biggest OTT platform in India in terms of the number of users. It is a subsidiary of Walt Disney and covers multiple languages and TV channels. It stands out for providing some of the highest-rated and longest-running TV content in the country.
Netflix is a relatively expensive OTT service provider in this market. However, it still offers more affordable plans that provide SD quality content on mobile devices. Interestingly, Netflix has stuck to the policy of keeping its user-base a secret in this market.
Amazon Prime Video, a major OTT or VOD platform in India, is a relatively affordable service provider. It provides viewers access to a vast library of content, 4K quality and unlimited downloads. Besides, its video-on-demand services also come packaged with its premium Amazon services and special deals for Prime Music.
OTT Platform Growth Trends
The Government of India launched its Digital India initiative in 2015. It is considered to play a big role in laying the foundation for the launch and flourishing of many OTT platforms in the country. This market has shown such massive growth trends due to influence from the following factors:
i. Massive Smartphone Market Penetration
The smartphone revolution has kick-started a new era in the field of TV viewing in India. Larger-screen smartphones, especially phablets, supported by high audio/video quality, have made the transition from traditional medium to digital medium an easier decision for the younger population in the country.
According to Statista, smartphone share in the market was 21.2% in 2014. It has increased to 31.7% in 2020 and is set to reach 36.2% by 2022. Interestingly, TV viewership is not expected to be affected by the growing market penetration of smartphone technology. It is expected to increase the online time spent by viewers in watching their favorite TV content. More and more people are viewing their favorite TV shows on their smartphones.
ii. Growing Internet Speeds
The roll-out of affordable 4G internet plans in the last few years has been a major driver behind the massive growth in demand for online content. This is perhaps the biggest reason for the massive adoption of VOD platforms.
Deloitte reports that the availability of faster internet speeds and smartphones at affordable prices have been the biggest contributors to the growth of internet users. Interestingly, even rural viewers are switching to online content. A series of government policies and initiatives have also fueled the need for digitization among the rural populace.
The most popular OTT platforms are generating a significant percentage of their revenues from freemium subscriptions and ad-based models. The modus operandi has been to initially lure viewers using free subscriptions and gradually convert them into paid subscribers with the promise of offering their favorite content.
iii. High Demand for Snackable Content
The average user spends around 20 minutes on video viewing. Many studies show that almost 2 in 3 Indian YouTube viewers prefer watching short content. This has inspired all the major content creators to focus more on the creation of short forms of snackable content. This form of content is a big driver in the growth of digital content consumption in this market.
iv. Creation of Original Content
Another factor that is driving massive growth in the Indian OTT ecosystem is the massive investment in the creation of original content. The Indian viewer has shown a greater tendency to spend on original content. All the major OTT service providers have entered into different types of collaborations with production houses to create quality original content. These services are creating such content in all the major languages that are in great demand.
Challenges to OTT Platform/ VOD Platform in India
There are many challenges that the Indian OTT market has still to overcome. These challenges are preventing this market from reaching its full potential:
i. Relatively Slower Internet Speeds
Despite the above-mentioned point of faster internet speeds in the country, this market has still a long way to go before it can match the speeds available in the West or in China. The infrastructure is still in its development phase and there is huge potential for growth in connectivity speeds. According to studies, a 5-second delay in the start of a video can turn away many users. While this is a challenge, it means there is massive potential for growth of OTT platform.
ii. Payment Systems
Payment mechanism is another major challenge that prevents OTT or VOD platform services from achieving their full potential in India. OTT subscriptions are affected because the Indian payment methodology has still to become digital-friendly. This is not an issue in metropolitan and other top tier cities. According to many experts, the widespread adoption of seamless digital payment systems will become the key factor in long-term growth.
The Indian OTT market is unique in itself. Most service providers can be seen offering their complete catalog of content through free trial. They don’t even require viewers to submit their credit card information.
India is perhaps the most difficult market to understand for OTT or VOD platforms. It demands greater versatility in language and regional content. It has a unique combination of varying demands in different tier cities and towns. It holds the biggest potential for growth as lower-tier markets and rural India continues to grow in terms of smartphone adoption and demand for content.
The biggest challenge for OTT platform or VOD platform services is to properly cater to the regional markets. This requires the market players to diversify their content libraries online compared to TV channels. Most services and content creators have begun working on this. Still, such a populated and diverse market requires high precision to target audience groups.
The Indian entertainment content industry is at the verge of a major revolution triggered by the boom in the OTT ecosystem. Reports from telecom service providers show that the average revenue per user (ARPU) is expected to grow by 4% to 5%. This gives a clearer picture of the growth in revenue that the OTT players can expect in the near future.