Why Indians will pay for content online

Because almost half the revenue of the media industry comes from pay; the context exists

Will Indians pay for online content?” is a question usually answered with “Of course, Indians never pay for content?”

That is incorrect. In 2016 Indians paying for content brought in just under half the revenues of the Rs 1,262-billion media and entertainment industry. In fact, ever since mass media took off, they have been paying. So, yes, Indians will pay for online content because the context of pay exists.

Think about it. Ever since newspapers have been around we have been paying for them, nominally so, but paying nevertheless. The average monthly subscription for almost all leading newspapers has risen over the years, according to data collated by DB Corporation from 2012 to 2016. Language papers, such as Malayala Manorama did much better with Rs 196 per month in 2016 against say Rs 153 for The Times of India (Delhi) in the same year.

Cable television began as a subscription-only service in the eighties in Mumbai. This was the early days when cable operators showed movies through the day for a fixed monthly charge. When they started offering satellite channels you continued to pay and still do—whether it is an average of Rs 217 per month to a DTH operator or about Rs 224 a month to a cable operator. Pay revenues in TV haven’t risen in real terms for many years now, but they exist.

Then there is film. You pay an average of Rs 181 for a ticket in any major multiplex or anywhere between Rs 50 and Rs 100 at a single screen theatre for 2-2.30 hours of content.

Roughly 34 per cent of print, 66 per cent of TV and 69 per cent of the film industry’s revenues come from direct payment from consumers.

Why then is this strong belief that Indians will not pay for content online? 

Because... everything on the internet is free.

Sure, a lot of news, information, and entertainment is free. That is because for now the internet is being subsidised either by parent firms—say Hotstar by Star India or Voot by Viacom18. Or through private equity funding. This explains the existence of over 30 entertainment video apps in India. But the principles of business that apply to print or TV apply to online too. Zee5 or Viu or Fastfilmz do exactly what offline content brands do—aggregate audiences and sell them to advertisers or charge a subscription. And since the entire media market cannot be ad-supported it stands to reason that pay is the way to go.

What this quantum could be is anyone’s guess. Here are a few sample guesses. You could say that 10 per cent of India’s 325 million broadband users will pay say Rs 100 a month for content—that’s Rs 39 billion. Maybe it will be 30 per cent of broadband users—in which case the pay market could be Rs 117 billion. Like I said, it is anybody’s guess.

The reality is that in 2016 digital advertising was a Rs 77-billion ad market of which roughly Rs 25 billion went to online video, going by Ficci-KPMG data. A very conservative estimate of subscription revenues for online video puts it at Rs 2.5 billion in 2016.

The biggest indicator of where the market is headed comes from the players themselves. Of 14 online video brands that I put together data for, 10 are pay or have a hybrid model where some part is free and then you pay. The context of paying therefore is being set early in this market as well. Remember the reason Netflix can do some of the best shows in the world is because it charges anywhere between $8 and $10 for a monthly subscription. Good content costs money to make and distribute.

The challenge to pay in India is not necessarily getting people to shell out money. It is cracking a payment mechanism for small-value transactions that suit a diverse, geographically spread market. Some firms are using scratch cards, some are selling bulk subscriptions—very few however are saying no to charging consumers. That is well begun.

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