Big screen's small debut

Every media player wants a shot at the over-the-top content market. Which one will crack the puzzle first?  

It takes just under two minutes for you to find, download and install the app, and a few more for you to fill in the personal details that digital brands crave and chase. But once that five-minute process is through, you have at your disposal a massive collection of shows, short films, music and movies to watch as and when you please. From drama to comedy, from 14-minute webisodes to two-hour movies — it’s all there, with no ads in between. For that privilege, you might have to fork over a nominal fee, but in most cases, all this is yours for free. You can watch as much as you wish, for as long as you wish — whenever you feel like it. All you need is a mobile device connected to a reliable Wi-Fi connection or enabled with a high-speed data pack. With over-the-top (OTT) content providers such as hotstar, OZEE, DittoTV, Eros Now, VOOT, Sony LIV, Spuul, HOOQ and Vuclip flooding smartphone devices, appointment viewing — like in the TV era — has become passé. With India being the second largest smartphone market in the world — an estimated 651 million pieces being in play in the next three years — and video fast becoming the format of choice, these providers seem to be on to something. Add to this the promise of 4G services being rolled out sometime this year, and it becomes clear just why Indian movie producers, content creators and television networks are launching their own OTT platforms. While 18 local players already exist in this space, the entry of foreign players like Netflix has spiced things up, with each service provider busy trying to crack the digital code. 

Chicken and egg
But who came first — the big-budget TV networks who spotted the digital opportunity or the new media newbies who pioneered the digital-first strategy? While that is debatable, the new media disrupters certainly seem to have experience on their side. 33-year-old Arunabh Kumar still remembers the day his pitch for a youth-centric series was rejected by a bunch of suits at MTV. “I wanted to make a series called Engineer’s Diary but was told that that’s not the kind of content youngsters want to watch.” In February 2012, the ex-IITian released Rowdies 9 — a spoof of popular MTV reality show Roadies — on The Viral Fever’s (TVF) YouTube channel, receiving over a million hits in just five days. Fast-forward to February 2016, when TVF made headlines for receiving $10 million in funding from Tiger Global Management. TVF, which currently boasts of 1.44 million followers on its YouTube channel, has since launched its own mobile platform TVF Play. This service also turned out to be the launch pad for the second season of the online entertainment network’s popular web series Permanent Roommates earlier this year, which registered 1.5 million video views in less than a month. “We have around 17 popular shows online; MTV and Bindass probably don’t even have those many shows on air, put together. The viewership for our top series alone amounts to three to four million, which I don’t think is the total viewership for any of these youth TV networks,” says Kumar. This probably explains why TVF made it to the ‘most watched YouTube videos in India’ list in 2015.

Another group with its shows on that list is comedy quartet All India Bakchod (AIB). The collective, which includes Tanmay Bhat, Gursimran Khamba, Ashish Shakya and Rohan Joshi, introduced the country to the comedy news show format with its series On Air with AIB last year. With a little over 1.5 million subscribers on its YouTube channel, the group has produced podcasts with stars like Kunal Nayyar of The Big Bang Theory fame and spoofs with celebrities like Alia Bhatt in Genius of the Year and Irrfan Khan in Every Bollywood Party Song. Clearly, AIB has been successful at grabbing eyeballs, which is why TV network Star India picked up its comedy news show not only for its channels, but also for its OTT platform hotstar. “We had pitched this idea to multiple players and there was a competitive bidding process. We went with hotstar since the company understood our format and content,” says Bhat, co-founder, AIB. 

Apart from such popular YouTube creators, Star India subsidiary Novi Digital’s OTT platform hotstar has also been quite aggressive in this space. The 21st Century Fox-owned broadcaster’s video-on-demand (VoD) portal announced its arrival with a marketing blitzkrieg featuring extensive promos on TV and in print (the company reportedly had a marketing spend of Rs.100 crore). The strategy paid off: the app was downloaded 40,000 times in its first week and had 10 million users within 40 days. Now, it is all set to air the ninth edition of the IPL. “Cricket viewership on hotstar is now nearly 50% of that on TV in urban India. We are expecting more than 100 million users during the IPL, making hotstar the primary screen for the tournament,” says Ajit Mohan, president and head, hotstar. Not surprising, then, that Star India chief Uday Shankar recently announced his plans to take hotstar overseas. In addition to big funding, millions of video views and app downloads, such platforms have also attracted the attention of big brands. While hotstar signed up marquee brands like Vivo, Flipkart, Raymond, Axe, Lloyd, Amazon and Airtel for IPL, TVF’s Pitchers and Permanent Roommates have attracted names such as Kingfisher, Pond’s, Uber and CommonFloor, while AIB has partnered with brands such as Askmebazaar, Tata Motors and Idea, and clocked Rs.25 crore in ad revenue through its show. 

Reason to cheer
The buoyancy in the digital advertising space is another reason for OTT players in India to rejoice. As per a GroupM report, digital advertising spend will touch Rs.7,300 crore in 2016, up from Rs.4,950 crore last year. The promise of more money seems to have reinforced the efforts of both top Indian television networks and movie producers. Gaurav Gandhi, COO, Viacom18 Digital Ventures, explains why now is the right time, “In the next two years, there will be more households with smartphones than households with TV sets. 90% of Indian households own a single TV set. Compared with the average US consumer, who spends five hours watching TV, we watch for only three hours. Does that mean that we consume less content? No. We consume more on our handheld devices.” Viacom18 launched its own video streaming mobile app VOOT in March. The app currently hosts over 17,000 hours of content, with 7,000 videos in the kids’ category alone. Gandhi says that a study by the Boston Consulting Group last year revealed that there are three-four genres that people watch regularly, and VOOT plans to deliver original content for the same. Along with content from the Viacom18 TV stable, the app will also stream seven original web series such as Badman, Soadies and Chinese Bhasad

Uday Sodhi, EVP and head, digital, Sony Pictures Networks, one of the first players in the OTT segment with the 2013 debut of Sony LIV, adds, “As broadcasters, we are looking for additional ways to connect with our consumers. Currently, we are leveraging the strength of our network.” Sony LIV, which spent six months digitising 40,000 hours of content from the past 20 years has realised that it will also need original content to stay relevant. This is also because the VoD platform, which progressed from the ad-based to the subscription-based model, is targeting the age group of 18-30 years. The network currently streams three original digital shows called Tanlines, LIV Shutter and Love Bytes. Sodhi claims the shows were a success, adding, “When we pushed our web exclusive content, we were able to bring in brands such as Arvind, Fogg and Maruti.” The Sony LIV catalogue also has a collection of 1,000 movies and the broadcaster is experimenting with the pay-per-view model by releasing box-office hits on the portal before TV. The Rajkumar Hirani comedy pk released first on Sony LIV, with SRK-starrer Dilwale playing a few weeks after its premiere. 

Zee Entertainment Enterprises has also launched two OTT platforms — OZEE, which hosts content from across Zee TV’s channels, and DittoTV, which streams premium content. So did film studio Eros International, whose OTT platform Eros Now streams movies, music and syndicated shows from across the border. Y-Films, the youth subsidiary of production house Yash Raj Films, dishes out web series, short films and music videos featuring movie stars. Raghav Anand, digital media head, EY, says, “With 100 million video viewers, the Rs.500-crore OTT market in India is thriving. This segment is expected to grow by 25% y-o-y due to increasing smartphone and internet penetration.” This explains the influx of several new services. Serial entrepreneur Ronnie Screwvala has partnered with TV18 ex-CEO B Saikumar and CNBC-TV18 ex-COO Ajay Chacko to launch a digital media platform called Arré in 2016. With Rs.150 crore in funding, the portal operates under Screwvala’s digital media start-up UDigital Content and has tied up with The Indian Express to source content for news documentaries. 

“We will provide original content in multimedia formats so that we host good reads, podcasts, doodles and videos across various genres,” explains Saikumar. Apart from looking at branded content, video ads and syndication partnerships, the portal is exploring tie-ups with telecom companies to include the service as part of customers’ data packs. Adds Saikumar, “We might look at subscription depending on our popularity and the evolution of payment mechanisms.” Ekta Kapoor has also joined this bandwagon, with Balaji Telefilms raising Rs.150 crore via a preferential issue in March to fund OTT platform ALT Digital Media. The latter’s CEO Nachiket Pantvaidya says the venture stems from Balaji’s desire to run a B2C business. “We want to provide an alternative to the content you see on TV. We feel that the needs of the individual viewer are largely underserved in India.” 

Where’s the money?
While each OTT platform is experimenting with content, one piece of the puzzle is missing: will consumers pay for such services? Indian OTT platforms currently deploy three different models: the ad-supported model AVOD currently used by hotstar and VOOT, where users pay for only data costs; the subscription-based model SVOD used on Sony LIV and DittoTV, where the user pays a monthly fee; and the transaction-based model TVOD, where users pay Rs.50 for movies available to them for the next 24 hours. Currently, broadcasters are keeping rates low, with packages ranging from Rs.10 for a daily pack to Rs.49 for a monthly pack, and Rs.1,099 a year for exclusive content. This is much cheaper than Netflix’s Rs.500 a month fee in India. While most VoD services began with AVOD, many have shifted to freemium or SVOD models. 

Pantvaidya of Balaji, which will follow the SVOD route, says, “We will launch with around 30-35 web exclusives, premium contentthat won’t be available elsewhere. Ads won’t interrupt your video experience.” He reasons that with a Rs.2,000 average monthly spend on e-commerce purchases and with payment wallets becoming more efficient, users won’t mind paying for premium content. Sony’s Sodhi insists that subscription is the only sustainable model. “If we’re offering a large library of content, then it has to be through subscription. This model has worked for movie viewing worldwide.” The high costs involved in the business could be one reason why SVOD and TVOD are attractive to OTT players. Says Vidya Subramanian Nath, research director, Frost & Sullivan, who tracks this space, “For serious OTT players delivering 500 TB — or 50,000 hours — of content, the business could cost Rs.30 lakh-40 lakh per month.” Networks are also investing in adaptive streaming technology, which allows content to be streamed with little or no buffering, regardless of the device or connection. This list of expenses ends with content acquisition and licensing costs.

Viacom18’s Gandhi puts things in perspective, “For TV, I rent the transponder space and pay for distribution, but my costs don’t rise as more people subscribe to the channel. However, on VOOT, if you consume eight hours of content, I have to pay the streaming costs for those eight hours.” The question still remains whether Indian viewers will pay for the content on offer. A report on the subject says of the 66 million video viewers in India, only 1.03 million pay up. Says California-based VoD player Vuclip’s COO Arun Prakash, “Before we launched Vuclip in India this year, we conducted a global video insights survey, which revealed that only 23% Indians were willing to pay for video content online. The propensity to download videos via torrent is dominant in India compared with developed markets.” Arré’s Saikumar says original content will be the key differentiator for digital media platforms. “As consumption habits change, audiences will continue to migrate from TV to digital devices and the main reason for consumers to pick one platform over the other would be the quality of original fare offered in a certain telltale style.”

Zee Digital Convergence CEO Debashish Ghosh reasons, “On an OTT platform, even if the content is free, the user is paying for data consumption. On top of that, why must he pay again for subscription? There has to be a unique proposition on offer other than just exclusive content.” Even AIB’s Bhat and TVF’s Kumar aren’t too optimistic about the SVOD model taking off. Says Bhat, “India is not really ready for SVOD, although I hope I am proved wrong.” He adds that currently, ads and branded content make up a major chunk of AIB’s revenue. Similarly, TVF also depends heavily on ads and brand sponsorships. Asserts Kumar, “India is a country where people have never paid for video content outside a movie theatre.” TVF currently provides content for free except for its Inbox Office, where it is experimenting with the TVOD model. Kumar adds that while production costs for a single episode vary from Rs.50,000-50,00,000, the company makes around Rs.2 million from a single sponsor for three to five videos, with ad-roll revenue around Rs.0.5 million-1 million.

Although Y-Films is a late entrant in this field, it seems eager to catch up. Counter-intuitively, head Ashish Patil declares, “I don’t have the kind of marketing budget that a hotstar or Eros has. One million views on a video generate Rs.1 lakh. That’s like pocket money. We’re never going to cover our costs with that kind of money.” So, the company has found new ways to monetise its web content, signing up marquee names such as Red Label, Lakmé and Airtel for series such as Man’s World, Bang Baja Baraat and Love Shots. Patil adds that while 80% of the money comes from sponsorships (where deals begin at Rs.50 lakh for one web series), the production house also looks at merchandising, talent management, music licensing, content syndication and re-make rights as additional revenue. “Consumers will need to pay a little so that we will be able to give them more quality content. But that will take another couple of years at least,” he concludes. While each of these OTT players has discovered the value of exclusive and original content, none have found a winning formula just yet. The subscription model proponents are banking on the uptick in smartphone usage, 4G services and e-wallets to turn around their fortunes, while some platforms are playing it safe and looking for additional avenues till the market matures. With reports predicting a 20-fold increase in mobile video traffic in India in the next four years, we might soon have a lot of smartphone users scouting for original short-format video content, some of who might not mind paying a nominal fee for good content. As for the OTT players, figuring out the kind of content that will work on the web, and the ability to dish out more of it, will determine the real winner.