Battleground India: The next frontier in online streaming

India presents the next frontier in online streaming, opening up multiple possibilities for global players, writes India Inc. Founder and CEO Manoj Ladwa.

Boris Johnson looks to be on the verge of pulling off his Herculean mission of passing the Brexit deal with the EU, but I am going to resist commenting on it just yet. Instead, there is another Herculean transformation happening in India, which merits a closer look.

Remember the early 2000s when mobile phones began gaining popularity in India. It began with a crawl to the first 10 million mobile phone subscribers followed by the painful walk to the 50 million figure. The sprint began sometime after the 50 million subscriber-mark; the numbers jumped exponentially, hitting 100 million, 200 million, 300 million every few months and years, before recently stabilising at around 900 million subscribers. These were followed by the rising spread of the internet across India. Now, the next chapter of that story is unfolding before us - the start of the online streaming revolution in India.

India to be among Top 10 Video OTT markets by 2022

India has the second largest number of internet users in the world. A recent report by one of India's industry bodies Assocham and PwC states that the video over the top (OTT) market in India is expected to be among the top 10 markets globally with a market size of $823 million by 2022. This mainly comprises content streaming services by companies such as Hotstar, Netflix and Amazon Prime Video. According to the study, while the Indian video OTT market is at a nascent stage, the global OTT market has entered the growth phase. However, with a CAGR of 22.6 per cent during 2017-2022, the Indian OTT market is poised to outperform the global OTT market; pegged to have a CAGR of 10.1 per cent during the same period.

Indian content comes of age

Till recently, foreign companies such as Netflix and Amazon Prime were streaming only popular international shows and Hollywood movies. This limited the market to a sliver of English-speaking Indian audiences. To penetrate the Indian market further, these companies added large volumes of Bollywood and regional language movies. They have also tied up with leading Indian production houses to produce shows with Indian content and stories - much like how Rupert Murdoch's Star TV became a household name in India by producing Indian television serials from the mid 1990s onwards.

Shows like 'Sacred Games', 'Made in Heaven', 'The Family Man' etc, made by leading Indian producers and directors, are being aired on Netflix and Amazon Prime. These shows have not only become wildly popular in India, they've even garnered audiences in non-Indian markets. 'Sacred Games' was also nominated for the Emmy Awards in the Drama category.

Internet, smartphone penetration key

A report by IHS Markit, a Nasdaq-listed consultancy firm highlights the following:

• India has one of the fast-growing online video subscription markets in the world.

• OTT subscriptions in India reached 12.21 million by the end of 2018, more than double the 5.12 million subscriptions at the end of 2017.

• Revenue growth is up from $1.46 million in 2015 to $44.6 million in 2018- a CAGR of 212.6 per cent.

Key initiators of growth in the Indian online video subscription market can be traced to two events in 2016:

• The entrance of Reliance Jio to India's mobile broadband market, which led to a drop in the cost of accessing mobile broadband.

• The demonetisation of high-denomination currency, which has driven many Indians to adopt online payments and to use credit cards.

The year 2016 was also when Amazon Prime Video and Netflix started their business in India. However, it is a local service, Hotstar, which was the market leader in the country by the end of 2018. Netflix in India is trailing Amazon Prime Video given the e-retailer is less expensive and offers more varied content. Local OTT services ALT Balaji, Eros Now and Zee5 joined Hotstar and global online video giants Amazon Prime Video and Netflix on the OTT leader board in 2018.

Fundamental drivers of growth

According to Assocham and PwC report, there are five fundamental drivers of this exponential growth.

1. Uninterrupted connectivity

2. Mobile devices becoming the primary source of content consumption

3. The need to move away from traditional revenue streams

4. Value shifting from content creators to platforms

5. Ability to provide a personalised offering to the consumer

As I mentioned above, the rapid growth of smartphone penetration is driving this trend. India's smartphone users are expected to reach 859 million by 2022, a CAGR of about 13 per cent. This coupled with the lowest data tariffs in the world, will ensure that the impressive growth in OTT services in India will continue unabated.

Internet consumption is clearly on the rise in India. The important factor for the VoD industry is the availability of devices that are compatible with online video viewing, particularly smartphones which seem to the most popular devices to watch videos. For entertainment moghuls worldwide, India then presents the next frontier.