Video on demand: India gets set for a big rush

Buying into the promise of fast growth in the video market, over half a dozen companies will launch their services this summer

Voot, Viacom18's video app, launches this week. Its goodies include 17,000 hours of shows such as Bigg Boss, Naagin and Roadies from its channels such as Colors, MTV and Nick. There is a huge section for kids with shows like Chhota Bheem and Pokeman from rival channels in addition to Motu-Patlu, Ninja Hattori and others from its own stables. There will also be originals every month, like Gulshan Grover's four-part movie Bad Man. The idea, says Viacom18 Digital Ventures COO Gaurav Gandhi, is to build a "TV station for the future".

Voot joins a long list that includes Star India, Zee, Sony, PCCW and SingTel among a host of media, technology and telecom firms jumping into India's online video market. There are half a dozen more, including Balaji Telefilms, due this summer. Each has raised between Rs 100 crore and Rs 500 crore to fulfil the promise that one of the world's fastest growing video markets offers. Of the 319 million internet users in India, about 170 million have smartphones that allow them to watch video. At last count, about 100 million did so. In 2014, online video got ads worth Rs 1,200 crore, over one-fourth of the digital ad pie.

That is not much if you know that the TV industry reaches over 800 million people and made Rs 47,500 crore in 2014. So aren't we seeing overcrowding in the online video market?

Nobody agrees - at the moment. It is party time for everyone: consumers because of the choices on offer, content producers and broadcasters because everybody wants to buy their shows, telecom and technology firms because here finally comes their chance to get into the media industry, and investors because video is the next big thing. So this is the time to make their bets.

"If you look at any metric - device penetration, bandwidth consumption and advertising - everything is growing 35-40 per cent. In such a space, a mad rush of investors is normal," says Sony Pictures Network Executive Vice-president Uday Sodhi.

"This market is finally ready," says Abhesh Verma, COO, nexGTV, an India-centric app launched way back in 2011. Gandhi points to an estimate that puts online video advertising at Rs 5,000 crore in five years.

Room for growth
The fact is that India is still an under-penetrated, single-TV-home market where the mobile and other devices have liberated many. "The younger generation is moving away from TV," says PressPlay TV Co-founder & CEO Anand Sinha.

Balaji Telefilms Joint Managing Director Ekta Kapoor says television is for mass audiences. The net is about the youth or an urban mass that has got marginalised after shows such as Naagin took over prime time. In February, Balaji Telefilms raised Rs 150 crore to fund ALT Balaji which will produce 300 hours of original content only for the web. By March 2020, Group CEO Sameer Nair expects ALT to have 4 million paying subscribers globally with average revenue per user of Rs 60-120 per month.

Why would audiences go to individual producer/broadcaster brands like Voot or ALT Balaji when most Indians do not keep apps for long on their smartphones and neutral aggregators such as PressPlay or Viu offer content from across the spectrum?

"Over 80 per cent of the premium content is owned by four to seven large players; if an aggregator comes in, what will it aggregate?" asks Gandhi.

Actually, there is a lot to syndicate from. For BBC Worldwide, which syndicates and produces shows such as Top Gear, Sherlock or Jhalak Dikhla Jaa, the launch of online video apps has been great for business. Analysts reckon that the price of the rights to English shows has jumped two to three times ever since online video consumption took off.

Then there are the originals which have largely defined the big successes online, the most notable being Netflix. It used its video rental subscribers as a base to start a video streaming service and then went on to become a producer with House of Cards. That is the reason analysts give someone like Balaji and Eros a big thumbs up.

The many models
While the patterns in India are still to emerge, there are three different clusters taking shape, say observers.

One is broadcasters such as Star or Zee who have a captive audience and for whom an online platform is easy on the pocket in terms of content as well as marketing. Whether audiences will come to these brands beyond catch-up TV or live events however is moot.

The second comprises pure aggregators such as Spuul or Viu. They are tech-savvy outfits that know how to package video and tag it best. But their marketing and content costs are higher because unlike broadcasters they do not have a ready audience to reach out to.

The third lot is players such as Balaji, Eros, Netflix or Amazon which are focussed on creating content - a capability they think they can replicate online. Some such as Netflix and Amazon start with an existing base, others don't.

Then there are other factors that come into play. "Content is important but packaging it correctly is more important. You could get completely different consumption patterns if it is not packaged correctly. For example, iconic movie scenes do better online than complete movies, and regional content does very well," says Vuclip Founder & CEO Nickhil Jakatdar.

Many mainstream broadcasters have chosen the advertising route because cable prices in India are abysmally low at Rs 250-300 a month. There is no price arbitrage a la Netflix which came in at $8-12 in the US where cable prices were $40-80 a month. Also, broadcasters such as Star and Sony have existing relationships with advertisers which are easier to leverage.

Others are hedging their bets with 'freemium' models. This means that some content is free and the rest is behind a paywall.

The party has barely begun.