Digital Media: Rise of On-demand Content www.deloitte.com/in 2 Contents Foreword 04 Global Trends: Transition to On-Demand Content 05 Digital Media Landscape in India 08 On-demand Ecosystem in India 13 Prevalent On-Demand Content Monetization Models 15 On-Demand Content: Music Streaming 20 On-Demand Content: Video Streaming 28 Conclusion 34 Acknowledgements 35 References 36 3 Foreword Welcome to the Deloitte’s point of view about the rise key industry trends and developments in key sub-sectors. of On-demand Content consumption through digital In some cases, we seek to identify the drivers behind platforms in India. major inflection points and milestones while in others Deloitte’s aim with this point of view is to catalyze our intent is to explain fundamental challenges and discussions around significant developments that may roadblocks that might need due consideration. We also require companies or governments to respond. Deloitte aim to cover the different monetization methods that provides a view on what may happen, what could likely the players are experimenting with in the evolving Indian occur as a consequence, and the likely implications for digital content market in order to come up with the various types of ecosystem players. most optimal operating model. This publication is inspired by the huge opportunity Arguably, the bigger challenge in identification of the Hemant Joshi presented by on-demand content, especially digital future milestones about this evolving industry and audio and video in India. Our objective with this report ecosystem is not about forecasting what technologies is to analyze the key market trends in past, and expected or services will emerge or be enhanced, but in how they developments in the near to long-term future which will be adopted. are likely to have a significant impact on companies Deloitte hopes that you and your colleagues find this operating in this space in India. point of view a useful stimulant in your strategic thinking Our endeavor is to provide a considered point of view on and planning. 4 Global Trends: Transition to On-Demand Content Media consumption across the globe is increasingly Mobile devices driving the digital consumption happening in digital formats. The increase in the Online media consumption has shown tremendous number of devices capable of supporting digital media growth over the past few years. Among the digital along with increasing internet access speed, has devices, mobile devices have taken over as the preferred provided consumers with an option to access the media medium of consuming online media. The smartphone content of his choice be it information, entertainment or market has seen an unprecedented growth in the last social activity anytime, anywhere. Media consumption in 5 years. Smartphone devices across the globe grew at the US has shown tremendous increase and has seen a a CAGR of 17% as compared to 9.5% growth in all significant jump from traditional media to new (digital) mobile devices. Smartphones crossed 2 billion mark in media. The rise of digital media players such as Netflix, 2014 and are expected to reach 4.6 billion by 2019. This Hulu, Amazon, Apple TV, Roku, and Boxee, etc. are increase in the number of mobile devices is making it challenging the traditionally maintained supremacy of easier for consumers to access music and video content the television as the main entertainment hub. on the go. In 2014, the smartphone mobile data traffic alone stood at 1.73 EB per month (69% of global mobile data traffic), which is expected to grow 10-fold from 2014 to 2019, a compound annual growth rate (CAGR) of 60%. Tablet mobile data traffic will grow 20-fold from 2014 to 2019 (CAGR of 83%) to reach 3.2 EB per month. 1 Figure 1: Global Monthly Mobile Data Consumption (Exabyte) 24.3 2 3 1 15.2 1 2 9.6 1 6.1 1 1 3.9 0 1 1 18 2.6 1 11 7 1 1 4 2 3 2014 2015 2016 2017 2018 2019 Smartphone Smartphone Tablet Others Source: CISCO Mobile VNI report, 2015 Digital Media: Rise of On-demand Content | 5 The internet has been and continues to be a disruptive years now. The devices used to access digital content force impacting distribution and consumption have evolved in the last few years that have increased channels for media. With better networks, coverage, the array of platforms on which a user can stream audio and advanced technologies (3G, 4G / LTE) the data and video content. Netflix share of internet traffic in consumption across the globe has risen. North America increased further and accounted for 34% of data flowing to consumers during the peak times in Audio & Video drive the global digital media first half of 2014. 2 Over-the-top (OTT) service providers consumption like YouTube and Subscription-based digital content Most of this data growth is attributed to different providers like Spotify have also acted as a catalyst in the digital media especially the entertainment services like growth of audio/video data streaming. The global audio video, audio etc. Globally, video and audio traffic has and video traffic combined is expected to reach 82% of dominated the internet data consumption for some all internet traffic by 2018.3 Figure 2 : Video and Audio will generate 89% of Consumer Internet Data Traffic by 2018 (Exabytes per month) 7.0 21% CAGR 2013 - 2018 12.0 6.9 10.8 6.9 9.3 89.3 6.8 7.8 6.5 6.5 6.1 71.8 5.5 58.0 46.7 37.3 29.3 2013 2014 2015 2016 2017 2018 Video/Audio Web/Data File Sharing Source: CISCO VNI report, 2014 Marketers are shifting their advertising spends The increasing popularity of digital media has provided towards digital media for a paradigm shift in the global advertising spends. There is a marked shift in consumer preferences towards Marketers are following the changing trend and digital media consumption as compared to traditional increasingly allocating their budget to digital mediums. forms of media which include TV, print press, and radio. Spending on digital media as a percentage of total People are spending more time each day on digital advertising spend is expected to increase from 21% rather than traditional forms of media. Data from the US in 2010 to 28% in 2015. 5 It is further expected to and the UK have shown that in last 4 years, there has reach 36% by 2020. This increase is mainly coming by been a significant increase in the time that people spend cannibalizing traditional advertising mediums like print. on digital media. 4 6 Figure 3 Actual time spent in minutes per day for an average adult (Minutes per day) UK US 26 24 20 50 80 95 95 96 268 195 200 264 346 254 126 191 2010 2014 2010 2014 Digital TV Radio Print Digital TV Radio Print Source: eMarketer Figure 4 : Change in global advertising media spend 6% 6% 6% 12% 17% 24% d 32% Spen 32% 30% %age of Total Advertising 36% 28% 21% 2010 2015 2020 Digital TV Print Radio Source: Deloitte Analysis Digital Media: Rise of On-demand Content | 7 Digital Media Landscape in India In line with global trends, the Indian consumer is June 2015, while 216 million internet users are expected increasingly consuming the content on digital platforms. to be in urban India by then. This trend is observed for all type of content including With improved networks, better access to internet, news (text), music (audio), or video. Increasing multimedia service-capable mobile devices and internet penetration and mobile device proliferation application development ecosystem, more and more and convenience of consuming the content anytime, media consumption would happen on digital platforms. anywhere are the key drivers for this trend. India has around 300,000 app developers and is already the second largest Android developer community in the Rapidly increasing internet users world after the US.7 India added 43 million internet users (20.5% growth) While the internet user base in India is growing at a from October 2013 to September 2014 and total rapid rate, most of these users (75%) belong to the age internet users crossed 254 million 6 in September 2014. group of less than 35 years. More than half of the app Out of these, 235 million 6users accessed internet users in India are aged between 18 and 24 years and through mobile devices. The growth in internet users a further 29% between 25 and 35. 45% of these users was seen both in rural and urban parts of India. Internet reside in the top 4 metros. 8 users in rural India is expected to reach 138 million by Figure 5: Indian internet users - age wise distribution 38% 37% 16% 6% 3% 15-24 25-3435-44 45-5455+ Source: vserv.com 8 Higher spend on entertainment services by youth On an average, an internet connected user in India spends 14% of his or her time and 17% of his or her monthly spending on entertainment. Combined spend by an internet user on Mobile and Entertainment increased by 34% in two years from 2012 to 2014. Figure 6: Average amount spent per month by Indian youth (`) 631 501 554 435 318 348 355 258 309 258 241 208 332 293 385 2012 2013 2014 Personal Care Grooming Coffee Shops Fast Food Movies and Entertainment Mobile Other Personal Expenses Source: Hindustan Times Report 9 In terms of media consumption, an average mobile Mobile Devices Driving Digital Media web user in India consumes about 6.2 hours of media Consumption daily which includes 102 minutes of mobile media and Internet traffic originating from mobile devices in India 79 minutes of online (desktop) media consumption.