Ups and downs of Indian video business: Covid-19 to hit revenue growth

The pandemic has accelerated the redrawing of the global media map

Take a look at the video business from the perspective of  a broadband connection. The number of streaming video, or over-the-top (OTT), brands in India has gone up from 36 in 2017 to 60 in June this year. However, OTT revenues are expected to remain steady at just over Rs 8,000 crore. Of this, Google’s YouTube gets the largest share (43 per cent), and Disney Hotstar and Netflix follow at a distant second and third (see charts).
 

While Covid will adversely impact online video’s revenue growth in 2020, the market is estimated to grow by a compounded annual rate of 25 per cent between 2020 and 2025 to reach $4 billion (Rs 29,000 crore), according to Singapore-based consulting firm Media Partners Asia (MPA).
 

Now look at the video business from the DTH or cable connection perspective. The Rs 79,000-crore linear broadcasting industry is the largest part of not just video but of the entire media business in India. Many of the largest broadcasters lead in the OTT space, too. “Even as online video continues to expand its share, demand for television remains intact with India’s overall video market set to reach $16 billion by 2025,” says Mihir Shah, vice president, India, MPA.

 

These are among the first few facts that stood out during the three days of talk around the Asia Pacific video industry last month at APOS, MPA’s signature event. Through all the chatter and presentations, five things stood out.
 

One: The Asia Pacific video industry is decimated, thanks to the pandemic. Advertising revenues across the region will drop by 16 per cent in 2020 over 2019 and take many years to return to last-year levels. India alone will take 34 months, or almost 3 years, to come back to 2019 levels, says Vivek Couto, executive director, MPA.
 

Two: Subscription video-on-demand (SVOD) is rising steadily from about 60 million to over 82 million. In India, more than 3 million homes now subscribe to a streaming service — up from 2.1 million last year. This is in addition to the 167 million homes that already pay a monthly fee for their cable or DTH connection. Add it all up and subscription revenues bring in over half of the Indian video industry’s revenues.

 

Three: The Telecom Regulatory Authority of India’s (TRAI) New Tariff Order and the lockdown are causing havoc in the large, profitable linear broadcast industry. India has 588 million mobile broadband customers and 33 million fixed line ones. “Confined to their homes, millions of households explored new uses for data — work from home, study from home etcetera. There is now a pent-up demand for fixed broadband. In the next five years, we expect India’s fixed broadband subscribers to double,” analyses Shah. “While there is a last-mile upgrade happening from telcos, the tariff regulations introduced by the regulator last year have made pay-tv services expensive for consumers. It has also adversely impacted the reach and advertising revenues particularly for niche channels. Broadcasters are thus re-evaluating their distribution strategy. Nearly a dozen channels have shut shop, many of which have opted for over-the-top mode of distribution.”
 

Four: Amazon Disney, Google, Apple et al make it to the list of the top ten global entertainment and tech majors in India, says MPA. That is not strictly correct. A bulk of Amazon India’s $3.5-billion top line probably comes from shopping. For Disney, all its $2.5-billion in India comes from media. But the point the list makes is valid — that it is global tech and telecom majors that will dominate this game in the years to come. “India is gaining a lot of importance for global strategics as China becomes increasingly inaccessible,” points out Shah. Note the flood of investments from Facebook, Google and others into Jio.
 

Five: Local content rules. “Ninety per cent of video content consumed in APAC is in local language. Global SVOD platforms are primarily focused on leveraging existing library, ‘global’ originals and tactical local content acquisitions with the notable exceptions of India and Korea,” points out Couto. On the ad supported side, “the demand for mass local language online video exists but other than YouTube, no global player is focused on the opportunity,” he adds.
 

Also, “there remains an opportunity for national (or regional) OTT champions to emerge through joint ventures, and mergers and acquisitions,” thinks Couto.
 

It will be a long time before this market settles down.