OTT platforms: Full stream ahead

It’s just another day’s commute to work. You’re jostling for the last available seat on a bus or train as dozens of people around you sit completely immersed in their smartphones. Until recently, people bent over their phones were mostly swiping left and right for games like Candy Crush and online poker. But now you spot one person watching a Korean high school drama, another binge-watching a British crime procedural, and yet another catching a live football game in a different time zone. What changed?

For starters, data became cheaper and smartphones became more accessible, enabling Indians to explore the ocean of content available online. And video streaming companies, known in business parlance as over-the-top (OTT) players, immediately pounced on the opportunity to potentially grab a billion eyeballs. A Nielsen report on smartphone usage in India titled ‘What Handsets Say About Consumers’ called video-streaming apps among the most engaging on a smartphone, accounting for over 50% of the time spent on a phone along with social networking, browsers, and image apps. A recent Boston Consulting Group (BCG) report pointed out that the Indian OTT market, which stands at about $0.5 billion, will grow to $5 billion by 2023 with rising affluence, higher data penetration into rural areas, and rising adoption across demographics driving this growth.

Now, what does OTT mean? Quite simply, it is a term for players who deliver content via the Internet without the involvement of traditional channels such as satellite TV or a telecom network. The advent of OTT services in India effectively began with the launch of Star India’s Hotstar in 2015. Cut to 2019 and India has around 35 OTT players, all vying for the attention of the same set of consumers. Global giants like Netflix and Amazon Prime Video have already grabbed a huge share of the pie, but indigenous players are not far behind.

It is unlikely the market is going to cool down any time soon. Original and exclusive Indian content is the biggest driver in this space, which means viewers can expect more shows like Amazon Prime Video’s recent hit Mirzapur and Netflix’s popular Sacred Games. At Netflix’s inaugural content event held in Singapore last November, the global streaming giant doubled down on its bet on India, announcing four new original series (including the much-talked-about Baahubali: Before the Beginning, a prequel to the blockbuster Baahubali) and eight new films, of which three are being produced by actors Madhuri Dixit, Anushka Sharma, and Priyanka Chopra. One of those films, Hotel Mumbai, is based on the 26/11 Mumbai terror attacks and stars Dev Patel of Slumdog Millionaire fame.

“We are a nation of commute streamers, with Netflix members kicking off their binge while on the road. Indians are 82% more likely to stream at 9 a.m., a behaviour that continues on the ride home too. Peak streaming in India is at 5 p.m.,” says Jessica Lee, vice president for communications for Asia, Netflix. “Indians are amongst the top mobile downloaders in the world for Netflix content. We launched downloads in late 2016; and then in 2018 we launched smart downloads (for now on Android only). Most recently, we enabled our members around the world to share directly to Instagram stories from their Netflix iPhone app.” Amazon Prime Video too is training its guns on the originals space, announcing three new shows this year close on the heels of the successful crime drama Mirzapur. The new offerings are a comedy series titled Four More Shots Please! that released in January-end, an action-drama series titled The Family Man starring acclaimed actor Manoj Bajpayee, and another original starring Kalki Koechlin and Jim Sarbh of Padmaavat and Sanju fame titled Made in Heaven.

With global heavyweights pushing the pedal to the metal when it comes to original Indian content, local OTT players too are going into battle all guns blazing. Hotstar has announced its arrival on this front with Hotstar Specials. Its latest initiative announced in January will see a slew of celebrated Indian directors including Shekhar Kapur, Sudhir Mishra, Tigmanshu Dhulia, and Nagesh Kukunoor delivering shows which will be available in seven languages.

However, this launch is just the beginning, according to Star India managing director Sanjay Gupta. Speaking to Fortune India, Gupta emphasised the company’s focus on creating content that challenges convention. “Hotstar Specials is giving us the opportunity to challenge convention. Today, our originals [Star India’s original content for TV] come five or six times a week. That has certain limitations,” Gupta says, adding that a web series gives the opportunity to tell stories using 10-12 episodes, which falls between a daily TV soap and film format. “What we are trying to do is get the best storytellers in the country and give them time to work on their stories and break the convention of delivering original content every day but do 10-12 episodes in one go,” says Gupta.

For Eros Now, the original content for digital platforms has to be different from the content on TV. Eros Digital CEO Rishika Lulla says, “I have great respect for these organisations [other Indian OTT players] and what they do. But it’s just a linear extension of a television experience. And how long can that carry on? If you look at the youth today, what they’re watching, the stories they want to hear and the stories that this country has to tell, it is not necessarily catered to in a broadcast experience.”

Lulla says after successfully premiering filmmaker Aanand L. Rai’s Meri Nimmo on Eros Now, the company has a slew of originals planned for the last quarter of FY19. “You’ll see some fun roll-outs with originals, we’re looking to kind of ramp those up to a minimum of two shows per month,” she says.

Jehil Thakkar, partner at Deloitte India who specialises in media and entertainment, is of the view this focus on originals indicates that players will continue to invest higher amounts in delivering exclusive, high-quality content. “The industry started out by placing a really high value on the library, people were boasting about having 3,000 titles and so on. What quickly came to light was that large libraries were not driving usage. What was driving usage was exclusive and original content,” he says, adding that with almost everybody identifying exclusive and original content as their go-to strategy, the cost of content is on the rise. “So the guys who are making hay are really the content producers… The budgets are much bigger in OTT projects, you have some large players spending big money on content. The supply chain is quite constrained and hasn’t yet reacted to the demand. There is a dearth of good content-makers who can produce that quality. So the price of content has gone up and as people throw money at this space, it will continue to go up.”

This bodes well for content creators like Dhruv Sehgal, who has written and starred in the Netflix web series Little Things. “It is an extremely exciting time to be a writer simply because I don’t think there has been so much work for writers. For writers, there is suddenly a community now,” Sehgal says. Industry sources say remuneration for writers has shot up and a good script can fetch anything between ₹1 lakh and ₹5 lakh from OTT giants.

But there is a mismatch between the rising cost of producing original content and the returns in terms of the number of paying subscribers out of total users. Most OTT players operate on ‘free’ or ‘freemium’ models, which means some services are free and some behind a paywall. “Around 70% of the total content on ALTBalaji that is accessed is done via free channels or through subsidised telecom schemes,” says Sunil Lulla, group CEO, Balaji Telefilms. The numbers for Eros Now paint a similar picture: While the app has around 142 million registered users, only 15.9 million were paid subscribers at the end of FY18.

Why then are OTT players looking to channel more of their energies and money into this space? The answer, according to ALTBalaji’s Lulla, is simple: The scope for growth is immense. “TV contributes around 80% of our total revenue, while the film business contributes around 15% and OTT 5%. I see the OTT business overshooting the film business on this front in the next three to four years,” he says. Rishika Lulla of Eros Now seconds this view: “I think we had a 270% plus growth rate year-on-year in subscriber numbers…We’re pretty confident that by the end of this financial year we’ll be sitting at about 16 million paid subscribers. We’re looking to double it essentially.

The BCG report too highlights this scope for growth in subscription revenues. The report titled ‘Entertainment Goes Online’ categorised the market into three types: SVOD (subscription-based video on demand), advertising-based platforms or AVOD, and transaction-based platforms or TVOD. It said while AVOD forms 82% of the market currently, by 2023 its share is likely to fall to 43% while TVOD and SVOD’s share will rise significantly. BCG also sees 40-60 million paying subscribers in India by 2023. “Overall, it is estimated that 16% of media consumption in India is already on digital media. Relative to developed countries, India is lagging. However, for the Indian youth, already 25% of media consumption is digital. This indicates that the growth in India is likely to catch up,” the report adds.

Such is the conviction in the scope for growth in this space that Star India is now replacing traditional TV channels Star has to offer with the OTT service abroad. “In the U.S., we have stopped Star network’s linear channels fully. We thought that Hotstar should be the only handshake with our U.S. consumers,” Star India’s Gupta says, adding that the switch from TV channels to Hotstar in the U.S. was made on January 4. Gupta also says that other regions will soon follow suit with Hotstar replacing regular TV channels being offered by Star India. “We are in the process of rolling out Hotstar globally.

By end of this year, we should be in every part of the world.” But is there room for over 30 players in the OTT market? Experts believe some consoli - dation may be on the cards. “In the medium term, you will see some consolidation. While you may have some newer larger players launch, you will see some shakeup as well in terms of some players being acquired or shutting down,” says Deloitte’s Thakkar. He sees the number of OTT players coming down to single digits in three to five years.

While the rising cost of producing content and the increased competition does put deep-pocketed players like global giants Amazon Prime Video and Netflix at an advantage, some smaller players like Viu, the OTT platform from Vuclip and Hong Kong-based PCCW, and Hoichoi, an OTT platform exclusively for Bengali content by SVF Entertainment, are betting on original regional content. Viu India, for example, plans 100 Tamil originals in the next three years.

Stakeholders are confident about growth, but they also believe the industry will take time to become more stable. ALTBalaji’s Sunil Lulla believes the OTT space will be in the early stages of growth till about 2023-24. “Like TV, the OTT space too will start regrouping. People who have good ideas for shows and can tell good stories will survive.”

However, Hotstar’s Gupta believes besides being a good storyteller, one needs to be a great technology player too. He adds that Hotstar will launch more initiatives with augmented reality and virtual reality during the IPL this year: “We have been very focussed on gamifying our sports content. You will see the next leap in this season of IPL… We are not focussed on gamifying stories right now, but that is something we are building the muscle for.” He hopes more experiments like Netflix’s latest interactive Black Mirror experience Bandersnatch will come along in the next few years