 "Online video gets everybody interested")
Then, in July, Viacom18, a partnership between Viacom and Mukesh Ambani-owned Network18, announced a digital venture that should, say sources, launch its service by the end of 2015, which will pitch it against Google-owned YouTube, Zee's Ditto TV, Multi-Screen Media's Sony Liv and Facebook, among others.
At 100 million viewers, India is already one of the world's largest markets for online video or over-the-top services as they are called. From under Rs 1,200 crore now, online video is estimated to hit Rs 4,000-5,000 crore in advertising and subscription revenues in four years. (See The big daddies of online video in India)
More than 300 million people online, 970 million mobile connections, rising penetration of smartphones and improving bandwidth are all indicators of a market in take-off stage. What will help the market explode is the launch of fourth-generation, or 4G, telecom services by Reliance Jio and Bharti Airtel. This, in turn, will mean more consumption of video, a very high bandwidth product. "The real party will start when net penetration hits 400-500 million," says Viacom18 Digital Ventures COO Gaurav Gandhi.
You can already see the beginnings of that kind of growth. Zee Digital Convergence CEO Debashish Ghosh says that Ditto TV should double revenues from its subscription-based service to Rs 70 crore next year. Eros Managing Director & CEO Jyoti Deshpande says: "In five to seven years, 50 per cent of our revenues could come from ErosNow and the digital initiatives -at greater margins."
The YouTube challenge
Where does all this put YouTube? With 70 million unique users in India, YouTube is not just the leader but also represents the context in which video has been consumed online in India for long. Based on Google's India revenues, YouTube's advertising revenues are estimated at Rs 600-800 crore (Google refuses to comment on the number). By next year this is likely to cross Rs 1,000 crore. That would make it a medium-sized broadcaster in its own right, bigger than NDTV or Times Broadcasting, though smaller than Sony or Zee.
Star, Eros and all the big daddies of entertainment in India have for long featured among the top destinations in India on YouTube. What does their venturing on their own mean?
"YouTube is like a multi-brand supermarket for content. It is not uniquely dependent on any one player," says YouTube Partnerships Regional Director (A-Pac) Ajay Vidyasagar. Most media companies claim they no longer treat YouTube as their primary content destination and use it more as a promotional tool. Vidyasagar says: "People will want to build their own platforms, but that does not limit their ability to be on other platforms. Most of us realise that we need a fertile ecosystem to realise value."
He has a point. The big battle is not Star or Zee versus YouTube. "The video industry in Asia-Pacific over the next three to five years will be about two parallel ecosystems that could collide or coexist," says Media Partners Asia Executive Director Vivek Couto. In India, these are the Rs 47,500-crore TV industry that reaches 800 million people and the Rs 1,200-crore online video market that (for now) reaches 100 million. They will be battling for the time and money of audiences and advertisers.
Will Indians pay for online video? At Rs 200-250 a month, average cable prices are very low in the country and the disparity between subscription-based services (online or on cable TV) is not significant. This puts a big question mark on subscription revenues. Ditto TV, with a respectable 1.8 million subscribers paying an average of Rs 50, is a rare example of a pay service. Ghosh reckons that at 2.2-2.3 million subscribers it will be a profitable service. "It is not possible for Netflix to walk in and do pay," says one analyst.
That leaves advertising, where competition will be intense. Hotstar's entry has already pushed up online video ad rates from Rs 300-400 per thousand viewers to Rs 400-600, say insiders. But the ad market is one where the big networks with over 30 channels each or Eros with over 3,000 films have a natural advantage - not just because of their size but because they are better equipped to serve popular content.
"Everything that sells on the Hindi general entertainment channels is working on Ditto," says Ghosh. This is true across services. "CID, Crime Patrol, all of Sony's top shows do well on the mobile phone," says Multi-Screen Media Executive Vice-president Uday Sodhi.
Sodhi points to the second challenge to growth: "a mechanism where small, recurring payments can be captured directly". Film clips and TV shows are about impulsive, high frequency, low value per unit (Rs 10-30) transactions. Ditto TV managed well because of the Zee group's retail presence. But the market is dominated by iTunes or telecom operators and most large content firms are yet to crack this one.
So are aggregators likely to win against content firms? Most cable and direct-to-home operators are neutral aggregators of online video content who have a direct payment mechanism with consumers in place. They seem better placed. Tata Sky CEO Harit Nagpal says: "It is more convenient for the consumer to go to a cable/DTH player instead of going to 17 different sites or apps."
"There is no right or wrong model. The winner could be a large multi-channel network (on YouTube), an aggregator or an app," says Gandhi.