India currently has about 102 million SVOD subscribers and this number is estimated to increase at a CAGR of 17% to reach 224 million by 2026, according to TMT (Technology, Media, and Telecommunications) Predictions 2022 report by Deloitte.
The report has predicted that India’s AVOD market is expected to continue to pull in more revenue than SVOD, increasing its current rate from $ 1.1 billion in 2021 to $ 2.4 billion in 2026. Over the same period, SVOD is expected to grow from its current $ 0.8 billion to $ 2.1 billion in 2026. SVOD subscriptions may also be affected by the bring-forward effect of Covid-19 as the currently accelerated growth rate may taper with the pandemic subsiding.
The OTT market currently makes up only 7−9% of India’s entertainment industry. However, the OTT space is expected to grow at a CAGR of more than 20% to reach $ 13-15 billion over the next decade, as mentioned in the TMT report.
OTT platforms invested an estimated $ 665 million in content in 2021, with Netflix, Amazon Prime Video, and Disney+ Hotstar leading the pack with a combined spend of $ 380 million.
Others, led by the Zee and Sony combo, are also gradually scaling their investments as they aim to catch up.
The report further stated that the share of regional language consumption on OTT platforms is expected to cross 50% by 2025, from 30% held in 2019, easing past Hindi at 45%.
The market for providing video streaming services in India is highly fragmented with more than 40 streaming players vying for the customer’s wallet. Global streaming service providers (such as Amazon, Disney-owned Hotstar, SonyLiv, and Netflix) compete with domestic service providers (such as Zee5, Voot, and MX Player) as well as a host of regional and ultra-localised players.
Demand for OTT streaming content based on geodemography is on the rise, both within India and internationally from the considerable Indian diaspora. The country is witnessing a boom in regional content and platforms created to address this demand.
India is still in the early stages of streaming wars and the cost of customer acquisition will continue to grow for OTT players, said Jehil Thakkar, Partner and Media and Entertainment Sector Leader, Deloitte India.
Thakkar further said, “There are more than 40 OTT apps in India and with more on the way various apps across geographies are growing by the day. The costs towards customer acquisition are going to be expensive with the increasing amount of money going towards content. We spent around $ 700 million on content last year and are edging towards a billion. Hindi was the largest genre in India but regional is also catching up.”
The pricing war intensifies as regional players challenge the dominance of the Big 3
The broadening of the traditional audience in the streaming space, the popularity of international content (such as Korean or Spanish content) in India, and the ability to attract a wider audience through subtitles and dubbed content have made established streaming service providers revise their strategy for the Indian market.
The report stated that in December 2021, one large streaming player slashed prices by up to 60% for its monthly subscriptions (prices for its basic monthly plan dropped from Rs 499 to Rs 199). On the other hand, two other global players also marginally hiked their monthly subscription rates, after finding a footing in the Indian market at highly competitive rates to attract a broader set of customers.
Most major streaming players have launched mobile-centric plans targeting price-sensitive millennials and Gen Z customers. These plans also capitalise on low data rates ($ 0.09 per GB) and a widespread smartphone user base (more than 600 million) in the country. Pricing for streaming services will remain competitive as players attempt to stabilise and consolidate their customer base while minimising the risk of churn to other services.
With more than 40 players operating in the streaming space, streaming service providers compete to ensure a continuous supply of exclusive yet affordable content. However, consolidation of service providers is expected as the market matures. In India, the recent merger of Sony Pictures and Zee Entertainment, which will create an entertainment behemoth, may just be the first domino to fall in a chain reaction of consolidation. The recently released government guidelines for OTT content can further accelerate the market consolidation, requiring OTT platforms to adhere to the same content rules followed in the TV and print industry. These new guidelines are expected to establish a level-playing field for the entire media industry and could force niche platforms that rely on objectionable content to shut down. Other segments in the media industry are also expected to witness consolidation in the near future as they look to shore up their defences, and strengthen and grow with the OTT-driven push in the space.
App aggregation and bundling
Each paying customer in India has, on average, 2.4 subscriptions. However, given the price sensitivity, Indian customers may not continue to pay for multiple OTT streaming services. App aggregation and bundling can play an important role in expanding the market by bringing considerable value to consumers in terms of affordability, useability (single sign-on, single-window content discovery, etc), and compatibility with existing devices. It also helps DTH and telcos remain relevant by capitalising on this trend, with each major player launching aggregator platforms and partnering with smaller streaming services to help improve their reach and broaden the content available for their customers.
The linear TV dilemma and the way forward for OTT
This growth of OTT in India is driven by heavy investment in original content, pricing innovations, low data costs, and the rise of short-form content. However, this progression from the early stage to the mass stage might come at a cost to the broader media industry as subscribers, especially in tier 1 and tier 2 cities, may switch to streaming platforms from traditional linear TV. Although India has largely escaped cord-cutting for now as TV viewership is on the rise, the industry cannot afford to become complacent. Linear TV players need to learn from OTT platforms, provide meaningful and quality content, and integrate the latest technology, such as connected TVs, to remain relevant in the new digital world.