After sports, Star bets on mobile TV with hotstar

With 16 million downloads, Star's mobile TV app is among the fastest growing digital services in the world. Can it prove to be a game changer?

Hotstar is just a mobile app - one among thousands launched every year. Yet Star India's third serious attempt at cracking the online code, launched in February this year, is worth a watch for three reasons.

One, with over Rs 7,200 crore in revenues, Star, along with Zee and Times Group, is one of India's largest firms in the Rs 100,000-crore media and entertainment industry. It sits on 20,000 hours of top-selling TV shows and films across seven languages and owns the rights to every major sports property there is in India today - in football, tennis, cricket and kabaddi.

Two, Star is owned by the Rupert Murdoch-controlled $32-billion 21st Century Fox which, along with sister firm News Corporation, is making some big online bets globally. In India, the two firms have acquired Screen, VCCircle and a minority stake in proptiger.com in the last one year.

Last, but most important, it is arguably the first major attempt by an "old" media firm to get audiences for sports and entertainment on mobile phones.

"When we did Indya.com or Star Player (the company's earlier digital initiatives), we had limited expectations. The scale and depth of the current attempt is significant," says Sanjay Gupta, chief operating officer, Star India. While he refuses to discuss the investment in hotstar, reports suggest it is over Rs 1,200 crore over five years.

At 16 million downloads and 50 million unique users, hotstar has seen "the fastest adoption for any digital service in the world. Facebook took 10 months and Spotify five months to get to a million," claims a statement from Star. The average time spent, 30 minutes per consumer per day, compares well with the 3 hours or so that Indians (read families) spend watching TV every day.

Advertisers like hotstar's focus and stickiness. "As a platform, it is more efficient because it charges only if a viewer sees the full ad," says Jai Lala, head (trading and partnerships, central trading group), GroupM, India's largest media agency.

Gupta thinks that hotstar should get a meaningful share of the Rs 4,350 crore online advertising and should break even in five years.

WHY HOTSTAR?

Going by a 2014 study undertaken by the Internet and Mobile Association of India, more than 78 per cent of the 152 million Indian internet users are mobile. The average spend on mobile internet, at Rs 235 per month, is almost as much as that for cable TV. With about 70 million smartphone users, India is as big as any European country when it comes to people with the money, time and ability to consume sports and entertainment online. This shows in the growth of online video consumption: 59 million and rising, says comScore, an analytics company for the digital world.

While the timing for the launch of hotstar seems good from the outside, internally too there have been several push factors — the biggest being 21st Century Fox’s global focus on sports. In 2012, Star paid the Board of Control for Cricket in India a whopping Rs 3,851 crore for the media rights to all international and domestic cricket played in India between 2012 and 2018. Around the same time, its (then) parent News Corporation bought out ESPN’s share in a pan-Asian joint venture ESPN-Star Sports (now Fox Star Sports Asia) for $220 million. Star India now owns the rights to the English Premier League, Formula 1, US Open, among others. Plus it owns the online rights for the Indian Premier League. This then forced it to start looking at monetising across platforms — including online — quickly.

Expanding the market
Clearly Star is betting that the mobile phone will be a game changer. "Eighteen months ago when we started thinking and planning on this, we decided to go only with the mobile," says Gupta. If hotstar can become the second, third or the fourth screen, Star could get over the biggest problem of expanding the television business - the dominance of the single screen home. About 92 per cent of India's 160 million TV homes have only one television set - by choice. This puts physical limits on the growth of TV consumption because different members could be watching different things if there were more screens.

Globally, video consumption and revenues on the mobile are on an uptick and this is true for India as well. According to a Nielsen study, mobile TV is becoming an app-driven industry with mobile TV apps having seven times more exposure compared to mobile TV websites.

The challenges are around the technology and the content. For example, most American shows would have 13 episodes a season with a total of about 100 hours over eight years. Indian shows go up to 1,000 hours in seven years. This makes discovering a show or an episode a nightmare. This was tackled by organising drama episodes in chapters of 15-20 episodes around a theme. To deal with the disparity in bandwidth, operating system and handsets, there are versions of programming that could work across 7,000 variations of operating systems and screen sizes.

Taking on Google
hotstar's big challenge, however, is not just technology. Or the poor online ad rates: Rs 100-300 for a thousand viewers compared to Rs 150-1,000 on TV.

The online media world is dominated by YouTube and Facebook, among others which aggregate rather than create content. Their algorithms determine what will work or won't. They set the rules of the game. Google commands more than one-third of the $133 billion global online ad revenues and about two-thirds of all searches in the world. In 2009, Murdoch called Google a "content kleptomaniac" and "parasite" and News Corporation blocked it from indexing content from The Times and SundayTimes. Two years later, it was back on Google.

Can Star battle this one out? "Our network share of viewership in India is meaningful (about 22 per cent all India across all of Star's channels). It is not 5 or 8 per cent. Therefore, hotstar becomes a meaningful destination (against an aggregator)," says Gupta. "YouTube is like a mall, there is lots of content ranging from one minute to full length movies. hotstar is more focused," adds Lala of GroupM.

The second danger, say observers, is that while sports events are driving audiences to hotstar, what will hold them there? Gupta points to drama. About 60 per cent of the views on hotstar come from drama - a lot of people are watching Diya aur Baati Hum and Yeh Hai Mohhabatein. This is an indicator that advertising revenues - on which hotstar's future for the next five years is based - will hold.