In two years, digital entertainment in India will be bigger than the world’s largest film industry.
That’s because more and more Indians are logging on to services like YouTube, Hotstar and Netflix on smartphones, according to a recent joint report by EY India and FICCI on the media and entertainment sector. Revenue from films is expected to grow at a slower pace to about Rs 19,200 crore by 2020 compared with Rs 22,400 crore for digital in the same time.
A third of 1.2-billion Indians now own smartphones. About 77 percent consume media on mobile devices, as a price war triggered by billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd. made data cheaper and faster. Average monthly data consumed by a user nearly tripled to 3.9 GB in 2017, and EY expects it to more than quadruple to 18 GB in five years.
Movie-goers are gradually declining. The country’s largest multiplex chain PVR reported slower-than-expected revenue growth in its most recent quarterly results as occupancy levels fell and footfalls declined, said a Nirmal Bang research report. The occupancy rate has been falling at least since 2015 for both PVR and Inox, according to their investor reports. While overall growth in films is “promising”, 2017 was a narrow year with select movies like Baahubali and Dangal driving growth, EY noted. Bollywood and the regional movie industry is now trying to fend off the digital challenge by seeking an eight-week exclusivity for theaters before movies are available on streaming platforms and television.
Over 250 million people viewed videos online in 2017, a growth of 64 percent over the previous year, EY said. That’s expected to double to 500 million by 2020, making India the second largest online video viewing audience globally.
Videos account for more than half of India’s internet traffic and that’s “just going to explode”, Archana Anand executive vice president & head of digital at ZEE5 India, said in the report. “We’ve only seen the tip of the iceberg.”
Indians’ hunger for digital content showed up in the trend of online searches where entertainment is becoming the largest sought category with 31 percent of all searches, EY’s report said. Videos and music make almost all of it.
The winners: providers of over-the-top media streaming services like VOOT, Hotstar, Netflix, Amazon Prime Video and others. There are over 30 video OTT platforms in India that offer paid subscriptions. Digital subscription income rose 50 percent to Rs 390 crore in 2017. That’s expected to hit Rs 2,010 crore by 2020, the report said. “With data charges at their lowest ever rates, consumers are beginning to consume subscription content, particularly when OTT services are bundled with data packages.”
Streaming services too are preparing to cater the growing appetite. A number of global and local players have struck distribution partnerships, while Netflix is even considering setting up studios in India.
The differentiator in the already crowded space, EY said, is going to be who can provide more original localised content. Three out four new internet users in India will be from rural areas who will consume data in local languages.
Data show that Indians' prefer viewing content in local languages with more than 93 percent of time spent on videos in Hindi or other local regional dialects. They also love it fresh. More than 70 percent of the content consumed is less than a year old.
OTT services providers offer or plan to offer more localised content. These include Inside Edge on Amazon Video Prime, the upcoming Sacred Games on Netflix, Salute Siachen on Eros Entertainment, Sarabhai v/s Sarabhai on Hotstar and My Virtual Girlfriend on Arre.
Netflix is launching four to five original Indian shows in the next few months and plans to add more than 100 hours of content catering to the local market. Reliance’s Big Synergy is also set to launch around six to seven web series for digital platforms like ALT Balaji, Amazon, Vuclip and Voot in 2018. Mainstream production houses like Balaji, Shemaroo Entertainment, SaReGaMa are also creating content for OTT platforms.
Even telecom operators are looking to ride the wave. Vodafone, Reliance Jio and Airtel have launched their own OTT services such as Vodafone Play, Wynk by Airtel and Jio Movies. State-owned Bharat Sanchar Nigam Ltd. has also tied up with Eros Now and Zee Entertainment's Ditto TV (now called ZEE5) for bundled packages.
Challenges for the OTT platforms remain aplenty. India's data speeds, though rising, are inconsistent and “do not allow a subscriber to view a video with optimal quality and at the same speed everywhere”, EY said.
“The average speed in India is quite low and even a five-second delay in playback of video due to buffering can cost a content publisher a quarter of their audience,” the report noted.
Complex intellectual property rights and licensing throw up another hurdle. As does the risk of piracy of content. But more than that is the fact that cable and direct-to-home still remains a cheaper option to OTT in India, EY said.
That won't be enough to stop the juggernaut. “Digital consumption will not change from the customer point of view – all trends indicate it will only grow – and now, being large enough, it must be made to succeed,” EY added.
Watch this discussion with ALTBalaji's CEO Nachiket Pantvaidya And EY's Ashish Pherwani.