Why DTH players are offering online video apps to serve millennials

Airtel, Dish TV, Tata Sky, the list of traditional TV distributors offering video apps keeps growing

Last month, Tata Sky announced a strategic partnership with the US-based video streaming giant Netflix. Over the next two months Tata Sky will start offering the service to its 16 million subscribers. “Eventually we will provide access to Netflix, YouTube or Amazon Prime Video. We will give you an additional box or change your current box so that you can get both live TV and Over-the-top (OTT) from the same device,” says Harit Nagpal, CEO and managing director, Tata-Sky.

That makes it the third direct-to-home or DTH operator in India to offer over-the-top (OTT) or streaming video apps. Airtel Digital TV launched Airtel Internet TV a year back with Netflix and AltBalaji among other apps for consumers who want to buy them. Dish TV’s Videocon d2h, too, offers Netflix. The Rs 62.38-billion Dish TV is India’s largest DTH operator with over 29 million homes. By Diwali, it will start rolling out hybrid boxes that enable OTT for subscribers to its flagship Dish TV, says Jawahar Goel, chairman and managing director. Globally, too, the $84.5-billion cable major Comcast, the largest media firm in the world, offers Netflix among other apps.

For apps, the reason to tie up with DTH players is simple: it is reach. In February this year, Netflix CEO Reed Hastings declared that its next 100 million consumers would come from India.

What do apps do for Tata Sky, Airtel Digital or Dish TV besides adding on-demand video to a linear offering? “This is a great defensive strategy,” says one analyst. “Millennials are not consuming TV. Data shows that those in the 18-30 or 14-35 age group are hugely underserved,” explains Ali Hussein, chief operating officer, Eros Digital. Across the board, analysts and video app CEOs go on about cord-cutting and an ‘online shift’ to explain this move by three of India’s largest TV distribution firms.

That is not entirely correct.

TV, TV and more TV

While cord-cutting is a reality in the US, TV in India remains an obscenely healthy and growing market. The Rs 660-billion TV industry reaches 915 million people who watch it for an average of three hours a day in India’s 183 million TV homes. “The non-OTT market is much bigger and growing much faster. There are 100 million homes that don’t even have a TV,” says Nagpal. Then there are 100 million cable homes and 30 million free-to-air homes, all adding up to a lot of room for growth.

On the other hand, India is the world’s fastest growing online market. There are 424 million Indians online, of which about 300 million have a decent broadband connection. The online video market has about 35 entertainment apps that make an estimated Rs 25 billion in ad and pay revenues. That is 3.7 per cent of the TV industry’s revenue. Currently, most apps are subsidised, be it Hotstar by Star India or Voot by Viacom18. What they offer is, largely, library content. ErosNow, for example, is based on Eros International’s formidable library of films. Then there are the originals — from broadcaster apps, production firm apps (AltBalaji) or international ones such as Netflix of Amazon Prime Video. Yet more than three-fourths of online viewing time is spent on catch up TV. It is the reason the Broadcast Audience Research Council is working hard on a combined metric to measure linear and on-demand viewing. It will help broadcasters get better ad rates for online viewing.

What then do traditional TV distributors stand to gain from offering online apps? For one, it is an investment in the future. “From a longevity standpoint, it is important to recognise the business you are in. For some years now, we have been tackling the question, ‘are we in the DTH business or the content consumption business.’ We are well-entrenched in the satellite transmission business. These (online) are new streams, new ways in which customers will consume. It is the reason we launched the Tata Sky Mobile app (in 2013),” says Nagpal. “As broadband penetration increases and data prices fall, it is evident that media consumption behaviour will undergo a change,” says Sunil Taldar, CEO, Airtel Digital TV. Eighteen months ago, Airtel conducted a research that showed customers wanted to watch online content seamlessly without having to change remotes, prompting the launch of the hybrid service.

Two, as Goel says, OTT is simply one more feature, like a personal video recorder. The twist comes with standalone apps. Because “Voot, Hotstar, Zee5 are about (broadcast) network content, they are already on DTH,” points out Akash Banerji, head marketing and partnerships, Viacom18 Digital Ventures. “The thing with an app is that it helps serve the long tail, so if you are a mad fan of gardening shows, you could find what you want to watch on an app,” says Myleeta Aga, senior vice-president and general manager, South and South East Asia, BBC Studios. Plus apps offers anywhere between 10 and 20 per cent of the retail price as commission/revenue share, making for a nice revenue stream.

Aga points to the evolutionary reality that underlines this handholding between linear TV distributors and on-demand video apps. “Netflix is very much like pay TV brands such as HBO in the eighties and nineties. They invest in content, there is no advertising and they are based on pay revenues. They (Netflix and other pay apps) are embarking on a similar journey like HBO. And in this journey, the partner is not just traditional TV firms but also telcos,” says she. Online video apps are trying to grow using the same platforms that an earlier generation of video firms labelled ‘TV’ used.

So far, it has had mixed results. Goel reckons that Videocon d2h has about 10,000 subscribers taking its hybrid service. Without sharing numbers, Taldar says that the Internet TV service is getting traction even in Tier II and III towns. “Three years from now this product will drive 30-40 per cent of customer acquisitions,” says he. That would make these alliances a win-win for everyone — DTH firms, apps and consumers.