The ‘Digital First’ journey

How OTT platforms can remain ‘on-demand ready’

October 2017

KPMG.com/in

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3 Table of contents

Foreword

Executive 06 The Indian summary 07 OTT market: 1 1 Key themes

Road map to a new digital world 27

Pivoting Key traditional IT considerations function to 45 53 for digital digital implementations

4 5 Foreword

The era of on-demand content as the preferred platforms for is here. Consumers are consumers. To achieve a increasingly accessing media market leadership position, an outside the confines of their internal organisational couches and within the transformation initiative, comfort of their personalised which aims to harness the Girish Menon 5+ inch screens. Moreover, collective energies of all Co-Head that screen is no longer stakeholders towards a single Media and Entertainment restricted to the elite as video minded ‘Digital First’ cause, is KPMG in India is going mass at a rapid pace of critical importance. and as the consumption It is this journey towards a grows, the OTT consumers digital organisation that we will demand seamless access are outlining in this document. to services, compelling stories Right from telling the digital and value for money. To story to the internal deliver the same, platforms stakeholders to implementing would require an intuitive the digital architecture on Himanshu Parekh understanding of what the ground, each step holds the Co-Head consumers want, without the key to survival and potentially, Media and Entertainment users having to ask for it. success in the market. KPMG in India As the OTT landscape gets hyper competitive, organisations which are able to tick all the above boxes may stand a chance to emerge

6 Executive summary

7 The ‘Digital First’ journey 8

The ‘Over the top’ (OTT) video consumption in India has rapidly evolved over the last year, There are about ~200 million online given the advancements in digital video viewers in India currently, infrastructure and efforts by platforms to which is set to exceed 400 million in create compelling content for consumers at the next couple of years. Although price points which provide value. the catalyst for online video boom was Reliance Jio, the trend now has Market potential wings of its own. With data set to be Growing internet penetration and data the dominant source of revenue for consumption is likely to help increase digital the telcos, and possibly home advertisement spends in India at 30.8 per cent broadband seeing traction in the CAGR between 2016 and 2021 with mobile future, the video consumption advertisement spends and social media aided growth is here to stay. digital video advertisement spends expected to grow at 50.9 per cent and 40 per cent CAGR – Gaurav Gandhi between 2016 and 2021 respectively. Chief Operating Officer Viacom 18 Digital Ventures Growth of digital advertisements in India and its constituents Further, other enablers such as Government of 350 294.5 India's 'Digital India' initiative, growing usage 300 of affordable smartphones, rising internet 250 penetration in rural India and rapid growth of 200

billion 132.5 digital payments has further strengthen India's 150 digital infrastructure. This has resulted in video

INR INR 76.9 74.4 100 dominating data consumption, which is 16.9 50 13.8 expected to continue to grow in the near 0 future. Digital Mobile Digital video advertisement advertisement advertisement spend spend spend OTT content consumption and 2016 2021 evolving trends The OTT content consumption is evolving from Source: KPMG in India’s analysis, 2017 niche to mass based content and long form content is gathering traction. The increased popularity of large screens and investments in The OTT landscape in India is punctuated by original content creation is further driving the the following key enablers, around which both consumption. Live streaming has emerged as a the growth of the segment as well as potential focus area for OTT players, with the sports success of platforms are woven. genre especially attractive from a viewership and monetisation point of view. Digital infrastructure The mass launch of 4G services by Reliance Jio OTT distribution in H2, 2016 and subsequent launches by The OTT distribution landscape is dominated incumbents was an inflection point in India’s by own platform players, although social data story. This disruption led to a rapid surge media platforms YouTube and Facebook still in data usage on the back of promotional offers constitute a major chunk of video viewership in by all leading telecom operators. India. With telcos betting big on data, partnerships with telcos is also emerging as an important medium to reach a fairly large, and a mass user base. 9 The ‘Digital First’ journey

Monetisation models and associated challenges While Advertisement Video on Demand Being passionate or even finicky (AVOD) remains the primary source of about user experience is the key to monetisation for the OTT players in the building a successful digital platform. country, the Subscription Video on Demand In this age of hyper competition, it is (SVOD) and Freemium models are seeing imperative to focus on building a traction, largely on the back of compelling strong brand which is differentiated. content, including sports. Sponsored content With over 200 million people in India has also emerged as an important every month and millions globally monetisation tool, with brands baking in the on the platform we think deeply on advertising messages into the content itself. the best user experience we can provide and Instant Articles, The growth in monetisation though, is partially LIVE etc. are such examples. held back due to challenges around digital viewership measurement and rampant content – Saurabh Doshi piracy which must be addressed in order to Head - Media Partnerships realise the true potential of OTT platforms and Facebook build a sustainable model in the future. Further, digital video businesses require high investments, and returns are currently not commensurate given the still evolving business models. Media organisations are Building a successful digital video business in currently attempting to bridge the gap between the long run requires sustained commitment to market share acquisition and economic the digital transformation process and a ‘digital viability, as they attempt to build long term first’ mindset. sustainable digital video businesses. Digital transformation Changing consumer demands rests on four pillars mandate companies to The path to digital transformation encompasses a holistic approach including; transform digitally clearly defining the organisation’s digital vision When users stream videos on their mobile and strategy, thorough understanding of the phone through an OTT platform, little do they customer proposition, accurately assessing the know the entire digital infrastructure that is set business design and, finally, carefully in motion to ensure that the content streams designing the execution plan. flawlessly. It is this internal infrastructure that defines the ‘OTT player of today’, and is a key ingredient for ensuring continue success in the competitive OTT landscape. Execution The adoption of digital infrastructure has planning evolved from resistance towards digital Business technologies to their mass adoption. Success design in the digital world is dependent on various factors such as time to market, customer Digital experience and the will to constantly innovate Technology transformation and change with the relevant developments in integration Fundamental not a one-off change in project the market. This requires OTT platforms to Customer across organisation identify and design digital solutions proposition front, mid DNA comprising strategies to predict, influence and and back respond to customer behaviour. office

Digital vision and strategy The ‘Digital First’ journey 10

• Data analytics: Data has evolved in type, volume, and velocity with rapid uptake of The tools, culture and training that digital technologies. It has become a new people require to know what content currency and key for OTT players to to create, and create it at scale are a understand the consumers and decode their different breed, even though they viewing patterns. Big data technologies borrow from the way traditional along with advanced analytics help answer television companiesz or creative key content and engagement questions, agencies operate. enable quick reaction and draw meaningful and actionable insights to fuel the customer facing productivity and enhance overall – Sameer Pitalwalla performance of the platform. CEO • Data protection and IP security: With OTT Culture Machine Media Pvt. Ltd. business models inherently digital in nature, data and content security has become even more paramount. It is vital for the platforms Key drivers for successful digital transformation: to protect data and content across systems, • Innovation focussed mind-set: Innovation has devices and the cloud. become hygiene for OTT players, given India’s crowded platform market. For a fruitful digital A successful transformation transformation, it is critical for the leadership to evaluate their business through a number needs a strong technology of facets and set up in-house labs to drive foundation both internal and consumer focused A strong technology foundation acts as the innovation. Companies could also look to set backbone of any digital transformation up incubation centres in the form of initiative. accelerator programmes, or partner with third-party innovation labs. The pivot from a traditional IT to ‘today’s’ digital function is underlined by an architecture • Integration across organisational DNA: that is agile, flexible, and is able to deploy Digital transformation requires a holistic technology frameworks to give quick insights strategy that permeates across the entire for decision making around customer organisation including front, middle and back behaviour and content strategies. offices. The OTT organisations should move past silos that have a traditional media (for eg: The ‘all-in’ commitment of the entire TV) bias and adopt a ‘Digital First’ mindset. organisation to the cause is a non-negotiable and is a precursor to embarking upon the technology deployment. In conclusion, the digital transformation journey of a media company comprises a As we transition into the new era marked strategic shift, with customer centricity where there is big focus in building at the core, and an internal thinking process direct to consumer digital businesses, that needs to change the organisational DNA one can derive substantially better into ‘Digital First’ mind-set. results if one uses the power and the collaboration of the entire organisation – particularly the established broadcast businesses. Successful businesses will be built when both units (digital & broadcast) synergistically operate and when one ensures participation of maximum number of people in the organisation in this digital journey.

– Gaurav Gandhi Chief Operating Officer Viacom 18 Digital Ventures The Indian OTT market: Key themes

11 The ‘Digital First’ journey 12

The Indian M&E sector is poised Mobile advertisement spend (INR billion) to reap the digital dividend

With increased digital media consumption, CAGR 50.9% stakeholders across the M&E value chain are embracing the change and experimenting with newer models of media consumption. This has led to a marked shift in advertising spends with marketers increasingly apportioning a larger 132.5 piece of their advertising budgets to the digital 90.6 64.5 media platforms. Globally, the share of digital 44.2 16.9 28.4 advertising spends is estimated to supersede television advertising spends by the end of 2016 2017P 2018P 2019P 2020P 2021P 2017 and account for around 37 per cent of total advertising spends1. Source: KPMG in India’s analysis, 2017 Digital advertising is expected to contribute nearly 27 per cent to the total advertisement spends in India by 2021, reaching a size of INR294 billion, up from INR76.92 billion in 2016, translating into a CAGR of 30.8 per cent Social media driving over 2016–21.2 With mobile phones being the advertising spends primary mode of digital consumption in India, Advertisers are innovatively leveraging social mobile advertising spends are expected to media channels, such as networking websites grow faster, projected to reach INR132 billion and blogs to connect with their target by 2021 from INR16.9 billion in 2016, at a CAGR of 50.9 per cent.2 audiences. Digital ads on social media platforms registered a 28 per cent contribution Although search and display advertisements to global digital ad spends, with Facebook remain the largest component of digital accounting for 15 per cent of the digital advertising spends with a 47 per cent share,3 advertising spends.3 this segment is relatively mature and is expected to grow at a slower pace when In India, social media’s increasing traction compared to video advertisements2. amongst consumers is largely linked to However, video advertisements, which is platforms such as Facebook and Twitter, which currently about 18 per cent of the digital ad have also tasted success by attracting the spend, is expected to grow at a CAGR of 40 per country’s marketers. Monetising social media cent by 2021. Non-metros now account for is becoming lucrative and brands are allocating almost 30 per cent of YouTube watch time, increasing digital budgets to social media backed by regional content, better devices and promotions.4 increasing internet access.2

Digital advertisement spend (INR billion)

CAGR 30.8%

294.5 1. Advertising Expenditure Forecasts, Zenith Optimedia Group 226.5 Limited, accessed on 21 Sep 2017 174.3 134.0 2. KPMG in India’s’s analysis and estimates, 2017 76.9 101.5 3. Digital advertising in India, 2016, Dentsu Aegis, March 2017 4. Google and Facebook duopoly in the consumer attention and ad 2016 2017P 2018P 2019P 2020P 2021P space, The Economic Times, 15 February 2017

Source: KPMG in India’s analysis, 2017 13 The ‘Digital First’ journey

Digital video advertisement spends (INR billion) With improving digital infrastructure and falling data costs, digital consumption is expected to become more mainstream. The 90 CAGR 40% ensuing growth in investment by advertisers, 80 70 buoyed by evolution of the audience 60 measurement technologies are likely to 50 continue to drive growth in digital ads over the 40 74.4 next five years. 30 20 10 13.8 0 2016 2021P

Source: KPMG in India’s analysis, 2017

India’s OTT landscape – Key players

Content creators Content aggregators Digital platforms Customers

AVOD Voot OZee TVF Culture Machine SVOD Amazon Prime Scoop Whoop Qyuki Netflix Hooq AIB Sun Nxt One Digital Arre Entertainment Freemium YouTube Alt Digital Hotstar Sony Liv Veqta Viu Ditto TV Sponsored content Smart Nirvana Digital could co-exist with any of TV the other three models

Technology/ infrastructure enablers

Vidooly RecoSense Preksh Purple Stream The ‘Digital First’ journey 14

The pillars of an OTT platform

02 Distribution • Build own platform 01 Content strategy • YouTube/Facebook presence • Niche vs. mass content • Third party licensing/ syndication Digital ad • Original content strategy Enablers measurement • Regional content focus • Partnerships with telecom operators and safety • Live content 03 Monetisation 02 • Advertisement 01 03 based • Subscription based Distribution • Freemium Curbing piracy Content Monetisation • Sponsored content

Key success factors for an OTT platform

Digital and payments Digital India – Taking ‘Bharat’ online infrastructure leading to The government’s ‘Digital India’ vision rapid growth of VOD services envisages a ‘connected’ India, right up to the villages, democratising information availability India is currently in the midst of a data for all. consumption boom triggered by a growing and deepening digital infrastructure The BharatNet project under the ‘Digital India’ initiative aims to deploy high speed optical • The launch of Reliance Jio in September fibre cables in rural areas to provide 2016 has been a watershed moment, which connectivity to 2.5 lakh Gram Panchayats and disrupted the telecom data landscape and deploy 25,000 Wi-Fi hotspots at rural telephone significantly contributed to the growth of exchanges by 20195. Though the rollout has internet usage and penetration. been slower than originally planned, the • The government continues to make efforts project has managed to connect 1 lakh Gram towards its long-term focus of creating a Panchayats and lay down nearly 2,20,000 digital economy with emphasis on mobile kilometres of optical fibre cable as of August, governance through the ongoing ‘Digital 2017. The budget allocation for BharatNet has India’ and ‘Smart Cities’ initiative coupled been increased to INR100 billion in FY18 from with the ubiquitous Aadhaar as the INR 60 billion in FY17 to further expedite the backbone of digital addressability in India. project.6 • Another critical long-term trigger is the Public Private Partnership (PPP) models are evolution of the digital payments also evolving, with Google in partnership with infrastructure, on the back of growing usage RailTel as backhaul provider to enable 400 of mobile wallets, Unified Payments railway stations in India with public Wi-Fi Interface (UPI), Bharat Interface for Money hotspots; and BSNL partnering with Facebook (BHIM) in addition to the traditional digital to set-up community public Wi-Fi hotspots in payment instruments. Currency rural India.7 demonetisation in November 2016 acted as a catalyst to push digital payments into the 5. Centre asks states to follow Andhra Pradesh plan for BharatNet mainstream. project, Economic Times; accessed on 18 September 2017 6. BharatNet project gets 10000 cr boost, The Hindu Business Line, accessed on 15 September 2017 7. Future of public WiFi hot spots in India, The Mint, accessed on 15 September 2017 15 The ‘Digital First’ journey

4G – Fuelling the digital economy Video - Driving the data traffic The entry of Reliance Jio has led to a An average consumer spends about 3 to 5 fundamental shift in the way subscribers hours on media per day, of which, ~35 per cent consume data. As on March 2017, 70 per cent time is spent on digital media consumption on of all wireless internet subscribers in India mobile phone. Video currently accounts for were consuming data at broadband speeds. almost 50 per cent of the data traffic and is set Average data usage per subscriber took a huge to increase to 75 per cent by 2020.13 leap from 147 MB/month in March, 2016 to 1 Consumers are starting to spend more time GB/month in March, 2017 backed by falling viewing media on the go, given the changing data costs, a trend triggered by Reliance Jio lifestyles. While sharing online videos on social and followed by the incumbents. The average media and consumption of short-form video user outgo per GB of data for GSM content has been the first wave of data connections declined sharply from ~INR 200 at consumption, long-form content consumption the end of June 2016 to INR 6.4 at the end of is now seeing rapid growth on the back of March 20178. improved connectivity and lower data costs. The same has also led to surge in wireless The consumers are moving from ‘what’s on internet connections, with India forecasted to TV’ to ‘what do I feel like watching’ mind set. have 730+ million wireless internet users by FY219. It is expected that high speed data connections (4G+3G) would comprise of 88 per Rural internet – Growth 2.0 cent of all wireless internet users by FY21, As growth in urban internet penetration increasing from a base of 260 million in FY17 moderates, rural India is set to drive the next 9 to 690 million by FY21 . phase of growth in India. Better digital Another positive contributor has been the infrastructure and entry of affordable steady growth in mobile device penetration, smartphone segment is set to change the resulting in the smartphone becoming the internet landscape in the years to come. As on primary device for media consumption. March 2017, 34 per cent of all internet users in Number of smartphones crossed 300 million in India were from the rural areas14. However, at a 2016 and are expected to cross 650-700 million 16 per cent internet penetration, the rural base by 2020.10 The average selling price of internet- holds significant growth potential. By 2020, 50 enabled mobile phones is currently just below per cent of India’s internet users are estimated INR9,000, which is half of that in China11. to be from rural India15. However, with the launch of 4G enabled feature phone at INR 1,500 by Reliance Jio, and Airtel’s proposed 4G smartphone at INR 2,50012, the market is set for the next wave of disruption, and the number of video enabled devices could go much higher than 650-700 million by 2020. Lower smartphone prices bundled with 4G data plans is set to create a ripple effect increasing the smartphone penetration, 4G consumer base and data consumption. Wireless data subscribers by technology (million)

900 8. TRAI Performance Indicator Report March 2016 and March 2017, 788 Telecom Regulatory authority of India, accessed on September 800 731 18,2017 675 700 9. KPMG in India’s analysis and estimates, 2017 604 313 10. India to lead global growth of smartphone connections – GSMA, 600 521 285 259 The Mint, accessed on September 18, 2017 500 429 234 11. India pips china in smartphone sales pace but lags in volume, 180 Economic Times, accessed on 13 September 2071 400 100 12. Bharti airtel plans to launch bundled 4g smartphone at rs 2500 300 376 before diwali to counter jio, Economic Times; accessed on 17 161 198 241 300 342 200 September 2017 13. VNI Mobile Forecast Highlights, 2016-2021, Cisco, accessed on 100 168 143 129 116 104 99 14 September, 2017 0 14. TRAI Performance Indicator Report, March 2017, Telecom Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Regulatory Authority of India, accessed on 18 September,2017 15. 50% of India's internet users will be rural & 40% will be women 2G 3G 4G by 2020: BCG , Times of India, accessed September 24, 2017

Source: KPMG in India’s analysis, 2017 The ‘Digital First’ journey 16

Digital payments - The key enabler Digital content consumption The government’s initiatives to usher in an era evolving due to changing of a cashless economy, have achieved a big demographics boost through the demonetisation drive that The Indian media consumer, young Indians in was carried out in November 2016. particular, spend nearly 4 hours watching Digital payment methods such as mobile television per week as compared to 28 hours wallets, UPI and card payments achieved on mobile, of which 45 per cent of time spent significant growth post demonetisation. There is dedicated to entertainment19. There is a was a surge in wallet transaction volumes by continuous shift towards convenience based, over 250 per cent16. India currently has more on-demand viewing. Further, given that most than 50 million active wallet users, and is expected to reach 350 million by 202217. The households in India are single TV households, introduction of UPI and incentive by the there is a growing trend of solo viewing government for promoting the usage of BHIM particularly among the younger generation. is likely to bring the masses on board the The OTT video viewing is likely to continue digital payments ecosystem. increasing by 32 per cent annually through 202020, with half of the consumer population Availability of seamless payment options is expected to increase the acceptance of digital expected to follow solo viewing methods. payments amongst consumers, resulting in However, until recently, OTT video viewing positive implications on the monetisation of was seen to be a niche play, targeting the digital assets. Further, direct carrier billing is youth, upwardly mobile, early adopter also gaining traction especially among segment. However, 4G data wars have SVOD/Freemium players and will aid disrupted the consumption patterns with data monetisation through integration of subscription costs with mobile bills. Players consumption widening and deepening across such as Ditto TV, Hooq and ALT Balaji have the length and breadth of the country, integrated carrier billing to offer unified demography and socio economic classes. payment options to their potential SVOD subscribers18.

16. Mobile wallets see a soaring growth post demonetisation, 19. “Internet Trends 2017- Code Conference”, Mary Meeker, Hindustan Times, accessed on 18 September,2017 accessed on 18 September,2017 17. KPMG in India’s’s Analysis, 2017 20. “How advertising in OTT will play out”, Financial Express, 18. Altbalaji goes global partners with boku for carrier billing to accessed on September 18, 2017 stream original video content, Pymnts, accessed on 18 September,2017 17 The ‘Digital First’ journey

From niche to mass Long form content seeing traction Historically, OTT could not capture eyeballs in The VOD content was initially seen as being the mass consumer segments, and thus the consumed largely during transit/travel, and content was being produced keeping in mind thus short form content traditionally gained the niche target audience. Global players such immense popularity. Short comedy clips (5 to as Netflix are largely restricted to English 10 minutes) from producers such as AIB and speaking audiences located in urban areas and webisodes (15-20 minutes) from the likes of even Amazon Prime Video’s and Hotstar’s TVF were the mainstays of OTT platforms. content play is currently largely urban focused. With the continual improvements in internet However, the next 200 to 250 million VOD data speeds and technology enabling quality users are likely to come from the middle class, streaming with low data consumption, long the masses and regional languages. form content has started to see greater Once known for niche content such as select traction. One of the most popular global series, movies and catch-up TV, the OTT market is ‘Game of Thrones’, has each episode greater now creating content for the mainstream than 50 minutes 21, and resulted in Hotstar audience, with shows such as ‘The Timeliners’ gaining immense popularity amongst viewers. (a new YouTube channel) the ‘Aam Aadmi ‘Big Boss’, with an average episode size of Family’ which is aimed at appealing to the around 50 minutes, is one of the biggest draws average middle-class Indian household. OTT on Voot, with the platform also airing extra, players are recognising the importance of the unedited content to attract viewer interest22. well-tried Indian formula of family drama with Heavy spends by Amazon Prime Video and comedy and clean language to attract the Netflix for acquisition of Bollywood movie masses. The content strategy of ALT Digital rights also points to the potential of long form media, by Balaji Telefilms, a platform providing content viewing on OTT platforms23. original Indian, family content targeting the masses, a positioning somewhere between Growing popularity of large screens Netflix and prime time Hindi soaps. The device ecosystem has also helped long Major platforms such as Hotstar, Netflix, and form content consumption, with the likes of Amazon are also investing heavily in building Amazon Fire Stick and Smart Televisions local movie libraries and original content helping video streaming on large television designed with a wider and more mass appeal. screens. Sale of Smart TVs has increased to The recent high levels of bidding for IPL digital 18- 20 per cent from 12 -14 per cent of the rights also follows the same trend. entire TV market owing to strong urban demand (65 to 70 per cent of the entire market)24. Further, ‘High Definition’ (HD) content on large screens provides a much better viewing experience than the smartphone screen. In the long run, the success of OTT platforms would be a direct function of increasing user stickiness, which in turn would be helped by adoption of long form content on bigger TV screens.

21. Game of Thrones, HBO, accessed on September 22,2017 22. Voot to stream Bigg Boss Season 10's 'Unseen Undekha' moments, Afaqs, accessed on September 21, 2017 23. New OTT Players Are Investing In Creating Original Content, Business World, accessed on September 18,2017 24. Low data tariffs push smart TVs, Times of India; accessed on September 14, 2017 The ‘Digital First’ journey 18

Investments in original content The significance of content for an OTT player For instance, Voot offers extended ‘Bigg Boss’ has led to the blurring of lines between content clips which include content that is not creators and platforms. Players such as Netflix otherwise aired on TV, though at no extra cost. and Amazon, which started out by licensing On the back of this exclusive content, Voot content, branched out to commission their generated more than hundred million views own original programming with ‘House of for ‘Big Boss’ in the first two months of its Cards’, ‘Orange is the New Black’, ‘Mozart in launch in 201626. the Jungle’, ‘Transparent’ etc.; the success of Additionally, with original content, the which has been a major factor in driving platform owns all the essential intellectual consumer adoption and stickiness on their property rights from the outset. In addition to respective platforms.25 granting exclusivity, owning the underlying IP Original content primarily enables platforms rights gives access to the potential for future to create differentiation and drive user licencing revenue opportunities. engagement and stickiness. Additionally, for broadcast networks, original content enables cross platform user engagement and retention.

Announcements regarding original content investments by OTT video platforms in India

Original content Tie-ups with Shows in the Platform budget companies/individuals portfolio/pipeline

Amazon INR 20 billion, spent • Excel Entertainment • Inside Edge Prime Video about INR 5 billion of • Phantom Films • Mirzapur the same27 • Anurag Kashyap • Made In Heaven Sony Liv Eros Now

Source: Amazon spends top dollar to win prime spot in digital content race, Economic Times, accessed on 19 February, 2017

25. Golden globes 2016 best TV comedy - Mozart in the jungle; The 27. Amazon spends top dollar to win prime spot in digital content Verge, accessed on 17 September 2017 race, Economic Times, accessed on September 19, 2017 26. OTT services landscape in india is getting more competitive; Broadcast and Cable Sat, accessed on September 18, 2017 19 The ‘Digital First’ journey

Additionally, the ‘reality show’ genre is also revenues via a new distribution medium Global being explored by the OTT players, with brands, such as Target and BMW, have started Amazon announcing three reality shows for the using live streaming to launch products and run Indian market including, Jestination Unknown, marketing campaigns29. Recently, the launch of Comic Kaun and The Remix, slated to be aired Vivo V7+ phone in India was streamed live on in early 201828 . various social networking and OTT platforms. Other phone makers such as Xiaomi, Samsung However, investments in original content needs also streamed the launch of their new models in to be balanced with economics given the India on Facebook and YouTube respectively30. dependence on AVOD models. Considering the fact that a 20–30-minutes fiction content on Hotstar also streams live news from Republic digital can cost between INR1.5 to INR2.0 TV amongst other channels such as Fox News, million, higher than the content cost on Fox Business, and the UK’s Sky News31. television; monetisation only through an Traditional players such as Times Now and advertisement (AVOD) based monetisation NDTV are using their digital presence for events model could be challenging and such as the Budget speech, election results SVOD/Freemium models would need to be among others. explored for long-term sustainability. However, the Sports segment has a significant ‘Live’ streaming – Emerging genre value for the consumer when viewed live and lends itself well to potential monetisation. Live Live streaming over digital platforms is on the sport broadcasts garner high advertiser interest rise. Major sports events, news, high-profile and ad rates both on linear television broadcast entertainment events, concerts and product as well as live streaming, case in point being ad launches are beginning to see traction in terms rates on OTT platforms, which have nearly of being streamed live. Social networking doubled y-o-y for the IPL and Champions websites like Facebook, Snapchat, Instagram, Trophy. The potential of this sub-segment could and YouTube have activated live streams where also be gauged by the recent IPL auctions where users can share their real life experiences. Facebook bid a substantial INR39 billion for digital video rights for five years.32 Live streaming helps event organisers get access to a larger audience and incremental

Platform Key live sports properties Reach

Hotstar  Cricket - Indian Premier League (IPL);  IPL – 80 million – Live telecast - Subscription based unique users in 2016, – 5 minute delay - Free up from 35 million in  Hockey – Hockey India League (HIL) 2015  Football – English Premier League (EPL); INR 999 for entire season; Bundesliga, Indian Soccer League  Kabaddi – Kabaddi India League  Motorsports – Formula 1 Sony Liv  Cricket – Live cricket (Sri Lanka, West Indies, Zimbabwe,  Sports – 30% of the South Africa, Pakistan, Caribbean Premier League) platform’s overall  Football - Live UEFA Champions League, Ligue 1, Serie A viewership  Wrestling – World Wrestling Entertainment (WWE)  UEFA Champions  Golf – European and Asian Tour, Ryder Cup, US PGA tour League – 20 million hits and 90 million interactions in 2016 Veqta  Boxing - Floyd Mayweather – Connor McGregor fight33  Baseball - Major League Baseball (MLS) Facebook  Football – Asian Football Federation (AFC) Cup matches34 Live

Source: Websites of Hotstar, Sony Liv, Veqta ; accessed on September 21, 2017

28. Amazon Prime Video bets on reality shows in India, The Mint, 32. Star India beats Facebook others wins IPL media rights with Rs accessed on September 22, 2017 16347 cr bid, Financial Express; accessed on September 18, 2017 29. Brands begin to see marketing benefits in livestreaming ,FT, 33. Sports OTT service Veqta bags India streaming rights for accessed on September 18, 2017 Mayweather vs McGregor bout, Economic Times; accessed on 30. Vivo v7 plus launch price in india specifications features, Indian September 17, 2017 Express, accessed on September 18, 2017 34. Facebook live to show AFC cup games in India, SoccerEx, 31. Republic TV to launch on hotstar, The Hindu Business Line, accessed September 15, 2017 accessed on September 18, 2017 The ‘Digital First’ journey 20

Regional language content The government is also undertaking several emerges as a key focus area for initiatives to promote digital literacy with the aim of reaching 60 million rural households OTT platforms with an investment of INR23 billion by March The growth drivers 2019.36 The government’s ‘Digital Saksharta Abhiyan’ (Disha) mandates handset For a nation with 1,600 dialects, 30 languages manufacturers to add support Hindi text and over 234 million language internet users, support in addition to at least one more official content in their own language holds significant Indian language.37 value for consumers. Regional language users, usually face difficulties in accessing English keyboards and have not had too much of a The regional potential choice when it comes to accessing local Nearly 60 per cent of regional language based language content online. internet users prefer to consume regional news, with 32 million language users Limitations of Indian language internet users35 consuming news exclusively on digital media. Further, the video viewership in India is 70% dominated by the regional language user base 60% 60% which is gradually increasing. Consumers 30% today spend time about 50 to 60 per cent of the average time on Hindi videos, followed closely by 35 to 43 per cent on regional content videos Challenges in Limited local High cost of Limited comfort with only 5 to 7 per cent on English38. The OTT using the English language internet and in accessing the players are recognising the regional keyboard enablement of limited internet content on the opportunity and thus are planning investments content access users's internet in creating original regional content. and platform device Hotstar has a large regional content library with more than 50,000 hours of content in 8 languages39 and has now launched an original Tamil web series. Voot envisages offering However, with the continued increase in content in Kannada followed by Marathi and regional language user base, this is one Tamil in the latter half of 2017. Sun TV also segment that digital companies cannot afford recently launched its OTT platform Sun Nxt to ignore. The Indian internet language user which offers 4,000+ movies, live TV channels base is expected to grow steadily at a CAGR of and TV shows in four South Indian languages 18 per cent to reach 536 million by 2021. namely Tamil, Telugu, Malayalam and Roughly 9 out of 10 new internet users in India Kannada40. are likely to language users over the next five years. By 2021, Marathi, Bengali, Tamil, and OTT players launched original series offering Telugu internet users are expected to form ~30 regional content per cent of the total Indian language internet user base and the number of Hindi internet Tamil web series - ‘I’m Suffering from Hotstar users is expected to surpass the number of Kadhal’ English users35. Marathi web series – ‘YOLO’ and Sony Liv Gujarati series – ‘Kacho Papad Pako Internet user base (in million) Papad’ 9 out of 10 new internet users in ALT Tamil web series – ‘Maya Thirrai’, India are likely to be language users 199 Balaji Bangla series – ‘Dhimaner Dinkaal’ over the next five years Bilingual Telugu and Hindi series – Viu ‘Social’, Telugu series – ‘Pelli Golla’ 175 536 and ‘Pilla’

68 234 Source: KPMG in India’s analysis, 2017 42 2011 2016 2021P Indian language internet users English internet users 37. India Union Budget – 2017, released March 2017 38. Nokia Mbit Report, Nokia, released March 2017 35. India languages defining market – KPMG in India’s and Google 39. Hotstar launches premium subscription at Rs 199 per month, report, April 2017 Star TV, accessed on September 14, 2017 36. Govt mandates Indian language support in phones from July 40. Sun TV network launches digital content platform SUN NXT, 2017, Indian Express, accessed on September 17, 2017 Economic Times, accessed on September 17, 2017 21 The ‘Digital First’ journey

Effective distribution strategy platforms usually withholding a substantial critical to reach the target chunk (~50 per cent)43 of the CPMs as platform audience access fee. However, this distribution model poses major Effective distribution of content is among the challenges around content discovery and brand critical factors that determine the performance dilution, as these platforms have a large library and long term monetisation potential of a VOD of similar, competing channels; with the service provider. The selected distribution possibility of declining CPMs as bargaining model also impacts long term brand equity, power of platforms grow. viewership levels and consumer stickiness. Indian content producers such as Chu Chu TV (Kid’s rhymes), AIB and TVF (Comedy) have Creating own platform registered immense popularity on YouTube Setting-up an own platform allows content platforms by adopting this model. creators to establish their brand, retain IP rights, control user experience and identify key Third party licensing/syndicating user touch-points. Usually, own platforms are content best suited for a Freemium monetisation model, as ‘for-digital’ content entails a high Hosting content or syndication deals with third production costs which needs to be suitably party OTT platforms provides content producers recovered through subscription revenues. avenues to reach a ready user base with no investments in infrastructure. The revenue However, platform owners have to contend models in such cases are usually on the lines of with high customer/traffic acquisition costs and minimum guarantee or fixed fee basis. limited opportunities around content syndication with rival platforms. However, such partnerships do not result in any brand equity creation, nor user loyalty Global majors such as Netflix and Amazon pertaining to a particular channel. Further, have built their own platforms and a resultant revenues in such models would be strictly brand equity and customer recall associated dependent on the success of the content, which with them. Disney has recently announced an is a bit of an unknown. end to its association with Netflix in 2019 and roll out its own platform for both television and Eg: Arre, a content focused player, has tied up movies, as well as ESPN41. BBC has also tied with Yupp TV; has a presence on the Amazon up with ITV to launch a SVOD based service, Fire Stick as an App; and tied up with Facebook BritBox in the US42. to premier its comic series ‘The adventures of Abbaas’ in February 201744. Looking at the Indian market, Broadcaster backed platforms such as Hotstar, Sony Liv, Ozee and Ditto TV (Zee), global players Telco partnerships Amazon and Netflix; and others such as Eros Now and ALT Balaji, have created their own As a result of the rapid data uptake over the last platforms, backed by library content and are 3 to 4 quarters, coupled with commoditisation now moving towards creating originals. and falling revenues on voice, content has become extremely important for telecom service providers to engage with and retain Building a presence across social their customer base. media based video platforms While operators such as Reliance Jio have some Hosting content on YouTube has been one of captive content (as a result of its stake in the simplest and effective distribution models, Network 18), others are trying to build out their especially for pure play content players with content library through partnerships with other limited resources to create an own platform. Of VOD platforms and content producers. late, Facebook’s video platform has also gained traction with many producers distributing content through dedicated Facebook pages. 41. Netflix should be afraid of Disney’s OTT play, Tech Crunch, These platforms provide producers with access accessed on September 21, 2017 to a large audience, at a fraction of the 42. BBC Worldwide and ITV partner to bring new SVOD service associated customer acquisition costs. The BRITBOX to the US, BBC UK, accessed on September 18, 2017 revenue models are AVOD based, with 43. KPMG in India’s analysis, 2017 44. Arre experiments web series launch on Facebook, Bestmediainfo.com, accessed on September 21, 2017 The ‘Digital First’ journey 22

Such partnerships allow platforms and However, given the costs associated with creators to access the 400+ million wireless original content that most platforms are internet user base45, with minimal costs to gravitating towards, AVOD models may not acquire that traffic organically. The revenue even lead to a breakeven on every video. As an models usually followed are a combination of illustration, assuming a CPM of USD1.5 to 2.5 advertisement based revenues, with a potential with You tube’s share at 50 per cent; and cost fixed fee component. While the content of producing an original, ‘for-digital’ episode of discoverability on a telco platform could be 23-25 minutes at around INR 1.5 million, the better than a YouTube, a plethora of video would need to touch more than 20 competing content, would make brand million paid views47 for the content producer to recognition and user stickiness difficult in the achieve a breakeven. Further, the lack of third long run. party digital measurement makes the ROI visibility for a campaign challenging. Netflix in India intends to partner with Airtel, Vodafone and D2H (DTH platform), while Subscription based (SVOD) models Hotstar allows Jio Play users to access its premium content at zero cost. Amazon India is The SVOD models have traditionally been reaching out to customers through multiple deployed by global platforms such as Netflix avenues of distribution like cab aggregators for and Amazon Prime Video, owing to their in-car entertainment (Ola), fixed broadband original content strategy right from the outset. providers for VOD services along with telco The model has seen tremendous success, partnerships (Vodafone)46. especially in markets such as the US, where OTT platforms emerged as alternatives to television, rather than the complimentary Monetisation models evolving to presence in India. a mix of advertisement and Unlike global markets, India has a robust cable subscription based revenues TV landscape, with a wide array of channels The rapid growth of OTT consumption in India available for INR 100 and above, and in some has seen the platforms continually evaluate the cases, free of cost through the DD FreeDish monetisation models adopted by them. The platform, which makes the SVOD play Indian market is characterised by four major challenging for operators. However a SVOD monetisation models – Advertisement based play is essential for long-term sustenance of a (AVOD), Subscription based (SVOD), Freemium platform, one which is especially focussed on being a mix of AVOD and SVOD; and original content. Sponsored content which could co-exist with Netflix has seen some traction on its SVOD any of the other three models. platform in India, with the focus only upwardly Advertisement based (AVOD) models mobile, English language speaking subscribers. The platform is estimated to have The advertisement based (AVOD) model around 200,000 subscribers, up from 50,000- essentially aims at monetising the 70,000 a year ago48. Other operators such as traffic/impressions on a particular video by Balaji Telefilms and Sun NXT have also gone showcasing advertisements, which may be in the SVOD way through their own platforms. the form of video or text. One of the most Business Subscription price viewed video on demand platforms in India, Platform YouTube, is based on the AVOD model. model (INR/month) 500 to 800 The AVOD model has also been adopted by Netflix SVOD (depending on some broadcaster backed platforms in India, number of logins) owing to their in-house library that forms the bulk of content available on the platforms. Sun NXT SVOD 50 VOOT and OZEE currently depend on advertising for revenue realisations from their Amazon First year - ~42 46 SVOD platforms . For small content producers, the Prime Video Second year - ~85 AVOD model helps them realise revenues without any investments in the underlying HOOQ SVOD 89 platform. Source: KPMG in India’s analysis, 2017

45. TRAI Performance Indicators, March 2017, Telecom Regulatory 47. KPMG in India’s analysis, 2017; paid views defined as when an authority of India, accessed on September 21,2017 advertisement is watched for a threshold limit 46. KPMG in India’s analysis, 2017 48. Based on industry discussions 23 The ‘Digital First’ journey

Freemium models Digital measurements and Freemium models are a mix of AVOD and piracy remain significant SVOD, with a strategy around fostering monetisation challenges customer engagement on a platform through a Third party digital measurement critical mass of library content and eventually looking to convert customers to a pay model The digital medium, by the inherent virtue of through original programming. its addressability in terms of the user accessing it, is built towards targeted customer The model is useful from the point of view of advertising. However, the industry at large is recovering a portion of operational costs facing a significant challenge in terms of through advertisement based monetisation consistency amongst measurement metrics from the library content, with subscriptions and third party validation of the viewer data. helping the platform turn profitable in the long run. Major global advertisers have expressed concerns around the same, citing an inability The leading OTT platform, Hotstar, follows the to arrive at a measureable ROI from digital Freemium model, with television dramas and advertising. In January 2017, Procter and serials largely available for free, while latest Gamble (P&G) cut its digital advertising spends movies, Live sports and global series such as by USD140 million50, due to concerns around Game of Thrones etc. available for a monthly brand safety and ineffectiveness arising from subscription. the digital campaigns. Business Subscription price Platform The large global networks like Facebook and model (INR/month) Google are actively engaging with the Media Rating Council (MRC) to undergo audits and Hotstar Freemium 199 work around defined standards for viewability and engagement51. In August 2017, GroupM Viu Freemium 99 rolled out their global viewability standards52; which streamlined the way video ads are measured. Eros Now Freemium 50 In India, currently no third party digital standards exist for validating ad measurement. Sony LIV Freemium 50 However, Broadcast Audience Research Council (BARC) in India has teamed up with dittoTV Freemium 20 Nielsen to launch an integrated advertisement measurement systems across TV and Digital Source: KPMG in India’s analysis, 2017 under the brand name ‘EKAM’ around the last quarter of CY’1753.

Sponsorships – An emerging and Digital advertisement fraud effective monetisation tool Fraudulent clicks on digital advertisements is Content producers are also realising the one of the major challenges being face by benefits of branded/sponsored content, which players globally, with such ‘malvertising’ is emerging as an effective means of estimated to cost marketers 16.4 billion54. India monetisation. The same helps in partially is worse off with mobile advertising click fraud recovering the content production costs, while 2.4x higher than the global benchmarks, and the advertiser benefit by having the brand stands at around 31 per cent55. message baked into the content, without the risk of losing customer attention due to 49. KPMG in India’s analysis, 2017 intrusive advertising. 50. Procter gamble cut 140 million in digital ad spending because of brand safety concerns, AdWeek, accessed on September Arre follows the Sponsored content model for 18,2017 51. Google follows Facebook with Media Rating Council audit of some of its content, and has roped in sponsors YouTube metrics, M and M Global, accessed on September 21, series like Gillette sponsoring ‘A.I.S.H.A’; while 2017 TVF’s (The Viral Fever) ‘Permanent 52. GroupM rolls out expanded viewability standards, GroupM, accessed on September 18,2017 Roommates’ had Ola Cabs as the anchor 53. Broadcast Audience Research Council Website sponsor49. www.barcindia.co.in; accessed September 18,2017 54. Businesses could lose 164 billion to online advert fraud in 2017, CNBC, accessed on September 18,2017 55. Mobile ad fraud in India 2.4x higher than the global average, Tune, accessed on September 18,2017 The ‘Digital First’ journey 24

Google reported issuing refunds to hundreds Game of Thrones, one of the world’s most of advertisers in August 2017, after detecting a avidly watched shows, is considered to be the large amount of bot generated fraudulent most pirated content globally, with many traffic. Although the refunds were around 7 to leakages dotting its 7-season history58. Star 10 per cent of the monies spent by these TV’s Hotstar, responsible for broadcasting the brands, the same was intended to build long- show in India famously spearheaded a term trust with advertisers56. However, smaller campaign ‘Torrents Morghulis’ after recent platforms are currently not technologically piracy incidents with the show59. equipped to handle the bot behaviour. The Across mediums, piracy not only damages need of the hour for the industry is to come revenues and market shares, but also deters together as one body, and implement content creators from investing in new content, consistent technology across digital platforms and thus the impact can be severe on SVOD to ensure sustained growth. platforms.

Brand safety Industry initiatives to curb the menace The concept of brand safety is still at a nascent Stakeholders in the OTT value chain need to stage in India. However, with growing ensure 360 degree approach to security and consumption on digital media, the concept will anti-piracy to prevent loss or leakage of be one of the critical challenges to tackle going original or acquired content. ahead. Although the illegal distribution of pirated Platforms like Google are globally trying to content is punishable under the Indian address this issue through effective filtering Copyright Act 1957, the same along with the basis the brand guidelines. YouTube has put Information Technology (IT) Act and The measure in place to ensure no advertisements Cinematograph Act, 1952, need to be updated are served around ‘hate speeches57’. In India, taking into account the mass proliferation of organisations are coming up with algorithms digital videos. which monitor content across digital platforms before letting an ad being served next to In June 2017, global content creators and on- content. demand platforms launched an industry coalition called Alliance for Creativity and Digital piracy – The menace continues Entertainment (ACE), with memberships from the likes of Amazon, Netflix, BBC Worldwide, Digital piracy is quickly becoming a serious Sony Pictures Networks, Star India, Warner threat to the OTT platforms, especially SVOD Bros etc. to protect and foster the market for based models as it provides viewers with free legal content60. alternatives to otherwise paid content with no loss in experience or quality. Moreover, due to Closer home, a step in the right direction was the current unregulated nature of OTT content, taken with the Internet and Mobile Association piracy has emerged as a real concern for the of India (IAMAI) constituting a working group industry players. to safeguard the interest of the digital entertainment businesses. The committee Easy access and universal reach of the digital consists of key stakeholders from large M&E world allows individuals to set up peer-to-peer players such as Hotstar, HOOQ, SET India, Star (P2P) sharing networks, generating a multitude Plus, Digivive, Radio Mirchi, Shemaroo, of links to the same content and in effect, Viacom 18, Netflix, Arre, Eros, among others61. distributing it to the masses for free. These The group aims at fighting online piracy and individuals, in turn, earn revenues through establishing best practices for the digital advertisements on their websites- more footfall content industry. leads to more clicks. The shutting down of some of these torrent websites has proven to be ineffective as with the closure of one, many more emerge, as has been the case with sites 58. Game of Thrones is the most illegally downloaded TV show for such as KAT, Pirate Bay, Rapidshare, the fifth year running, The Independent, accessed on September Megaupload, etc. 21, 2017 59. Hotstar declares war on torrents, Game of Thrones style!, Business Insider, accessed on September 18,2017 56. Google refunds ad companies after detecting fraud, Times of 60. Global Entertainment Companies Join Forces to Launch the India, accessed on September 18,2017 Alliance for Creativity and Entertainment to Reduce Online Piracy ; Alliance4creativity, accessed on September 21,2017 57. Google Begins Biggest Crackdown on Extremist YouTube Videos, Bloomberg, accessed on September 21,2017 61. IAMAI sets up committee to work on fighting online piracy, Economic Times, accessed on September 21, 2017 25 The ‘Digital First’ journey

Industry bodies such as Motion Pictures platform and their resultant engagement, while Association of America – India arm (MPAA for others, building a profitable business from India) and Federation of Indian Chambers of the outset defines their long term vision. Commerce and Industry’s (FICCI) media arm, While the customer engagement focused have been actively engaging with the platforms are likely to see rapid growth in government to fight online piracy. Focused terms of active users and time spent on the units such as MIPCU (Maharashtra Intellectual platform, the traffic/customer acquisition costs Property and Crime Unit) and Copyright Force and investments in content would imply a long (a joint initiative of Telangana Intellectual gestation period before profitability kicks in. Property and Crime unit and MPAA India) are Such platforms however, may have more mandated to exclusively work towards curbing leverage, when it comes to cashing in on the the online growing piracy menace in the years large potential that online video holds. to come62. The above does not imply that a focus on Scale and economics – A profitability is a flawed strategy. Recovery of balancing act for OTT platforms operations and content costs to build a long- term sustainable business is probably the most The year 2016 saw OTT platforms proliferate critical focus areas for media organisations. with the video on demand segment in its However, platforms would need to be infancy. However, with increasing maturity cognisant of the benefits that customer loyalty around distribution and content strategies by and continuous engagement bring in, and the stakeholders in the industry, the segment has revenue potential that operations at scale can reached a stage, where current decisions will achieve. have a significant impact on which platforms survive the VOD race in the long-run. Business that can delicately balance the above considerations, along with compelling and The key indicators for some platforms today discoverable content would eventually be the are not around profitability margins, but more likeliest winners. around the critical mass of customers on the The ‘Digital First’ journey 26 Road map to a new digital world

27 The ‘Digital First’ journey 28

Digital is the new normal and As a result, organisations need to be flexible, requires a fundamental mind nimble and develop strategies to predict, influence and respond to customer behaviour shift to be able to optimise the digital opportunity With online video consumption gaining and combat ever evolving challenges. This traction and becoming ‘mass’, traditional value requires organisations to modify their DNA chains and business models are facing from their business and operating strategy to widespread disruption. Players across the internal structures, processes and also the way value chain are exploring the digital universe employees think and perform their jobs across with some players embracing the shift while the front, middle and back offices. the others are still testing the waters. Major operators in the OTT domain in India are Digital transformational journey traditional companies ranging from broadcast requires a digital first mind-set networks, telcos and content producers. However, operating and business models in The road to digital transformation is an the digital environment is very different to ongoing journey with iterative processes and what traditional businesses are used to with evolving goal posts. However, we have continuously evolving technology, unclear attempted below to categorise the business models, customer experience centric transformation process into four broad phases approach, evolving consumption patterns and i.e. defining a digital vision and strategy, rapid response time. building customer proposition, developing business design and planning execution.

Phase 2 Phase 1 Phase 3 Phase 4 Customer Digital vision and strategy Business design Execution planning proposition

Operating constraints

Digital Strategic Customer technology context research strategy

Digital Digital Digital strategy capability strategic and business model road map plan Strategy Current state Customer and Operating execution and digital staff model programme maturity proposition impacts design Technological, cultural and operating change management

Source: KPMG in India’s analysis, September 2017

28 29 The ‘Digital First’ journey

Phase 1 – Digital vision and strategy ‘Digital vision and strategy’ phase is the backbone on which digital transformation projects are born. The same encompasses

To determine the macro and micro trends covering digital infrastructure and access, 1. Strategic context demographics, technology, consumption patterns, content, etc.

2. Current state and To determine the organisational capabilities and positioning around digital, the gaps and skills digital maturity required to operate in a digital environment relative to peer and industry benchmarks assessment

3. Operating constraints Is critical to determine a balance between what is feasible given the financial and operating assessment limitations of an organisation and the optimal desired end state

4. Digital strategy and To determine the approach to a digital play, the business potential and the related business business plan economics

5. Technological, cultural and operating To identify the organisation wide changes required to operate in a digital environment change management

Strategic context – what is happening around you While digital and OTT is at the top of the mind for many media organisations, it is critical to gain an in-depth understanding of the real digital opportunity and the role/positioning that is best suited for each organisation. This would require a thorough assessment of various elements such as: • Evolution of digital infrastructure, digital penetration and access • User demographics and evolution of consumption patterns • Content trends and evolution ` • Monetisation trends and potential ` • Distribution models • Technology evolution and ` ` • Competitive landscape and strategies

` `

29 The ‘Digital First’ journey 30

Scan and map Derive key threats Prioritise impact Prioritise emerging digital and opportunities using profit pool data mitigation responses players and innovations (including themes)

• Assess emerging • Identify overarching • Build quantification • Define potential disrupting technologies in themes across players model to size potential interventions to mitigate media space and business models impact of selected risks, e.g., themes • Analyse the competition • Link themes to specific – Re-allocation of products and revenue • Assess impact over investment and gauge the revenue drivers short-term, medium-term potential for a new entrant and long-term horizons – Small ticket in digital space acquisition • Identify profit lines/areas • Define framework and facing significant threats – Partnerships/equity conduct scan of emerging or opportunities stakes business models • Take into account • Recognise the well- balance sheet impact, rounded and adaptive costs, and risk skillset evolving in the market • Review previous work related to digital and current beliefs about digital

Source: KPMG in India’s analysis, 2017

Current state and digital maturity assessment – An honest look inwards A clear understanding of how the organisation performs today and its level of digital maturity would provide clear direction as to where the organisation should focus its attention and strategy. Timescales and action plan can vary significantly based on maturity of an organisation’s digital capability and buy-in from senior executives. Organisations need to be brutally honest in terms of assessing their digital maturity, as the tendency is to overestimate the level of digital maturity and a misdiagnosis would have severe repercussions on the digital rollout.

Existing business insight New VOB insight

Functional Current state Organisational KPI Channel Financial richness Maturity operating performance volumetric KPIs compered to assessment SWOT model competition

Immature digital organisations Mature digital organisations

Educate, inform and win support

Market protection, remaining competitive, innovation

Note: VOB refers to Voice of Business Source: KPMG in India’s analysis, September 2017

30 31 The ‘Digital First’ journey

In less mature organisations, there is a need between the desired end state and the for extensive stakeholder management and operating and financial constraints of the pitching of digital as a credible investment area organisation. While media companies can opt compared to traditional, which is a more for a high investment model focussed on comfortable investment. Ultimately, if market share acquisition and high customer investment in digital goes up, it is likely to engagement, this is likely to require significant reduce investment in other business areas. levels of investments. Additionally, OTT business models are still evolving and as such A number of traditional media organisations current economics and returns may not underestimate the challenges around a shift to compensate for the investments required. An a digital model, most of which stem from lack organisation needs to have a clear sense of its of true understanding of ‘what is digital’ for state of digital maturity, capability to invest, their organisation and overestimation of their expectations on returns and calibrate its state of digital maturity. desired digital end state accordingly.

Operating constraints – dream vs It is also essential to define the KPIs to measure the success of digital transformation reality process since the strategy to achieve different Combining the ‘outside in view’ of the market metrics would need to be different i.e. revenue with the ‘inside out view’ of the organisation vs market share, customer experience vs will enable a company to identify the gaps profitability, etc.

Digital strategy and business plan – the way ahead An integrated view of the strategic context, current state and operating constraints will enable an organisation to determine its overall digital strategy.

Strategic The objectives represent the goal that the context strategy will be designed to achieve. The more clearly they are defined, the better is the Current state Inputs and digital chance of producing an effective strategy. maturity The principles underpin and inform the development of the strategy Operating constraints

Source: KPMG in India’s analysis, September 2017

While evaluating the desired digital end state, key aspects that should be addressed are • Platform play vs licensing models • AVOD vs SVOD • Market share vs economics • Brand building and mindshare Once the overall digital strategy is designed, the related business case along with the core components such as timeframe, approach, investment requirements, etc. needs to be determined.

31 The ‘Digital First’ journey 32

Cultural and behavioural change management – change in DNA Culture development plays a determinant role in the success of digital transformation. The company cannot bring transformation without addressing the human element. Culture is intrinsic to any organisation and has to be addressed before embarking on to the journey of digital transformation. Thus, effective change networks and elaborate communication plans are essential to disseminate the change efforts as digital affects all areas of a business.

Strategic Senior leadership alignment critical to success of any change alignment programme

Systemic Behavioural change is complex, impacting the whole approach organisation

People perform well in an environment they have been Employee involvement part of designing

Sustaining change is the primary objective of any change program. Measuring the impact of change Sustained benefits enables a sustainable approach

Communication is a strategic lever to Communication strategies enhance awareness, buy-in and ownership across the organisation

Source: KPMG in India’s analysis, September 2017

The leadership needs to understand the can deliver and align these technologies to required changes that are crucial for digital drive business value. According to a recent transformation, including new skills, employee survey, more than half of the surveyed IT behaviours, organisational structures and services firms said that innovation and critical corporate culture. With the adoption of new thinking are the key shortcomings both technologies such as artificial intelligence (AI), amongst fresh engineers and existing augmented reality (AR), virtual reality (VR), workforce, as they look at digital cloud, machine learning, big data and Internet transformation.1 of Things (IOT) into business operations, organisation would require a workforce with 1. AI dominates: Indian IT stares at talent shortage in digital, specialised skills that cloud skills, Business Standard, 9 January 2017

32 33 The ‘Digital First’ journey

Phase 2 – Customer proposition Four categories of customer research relevant to digital strategy Customer experience and engagement is at the core of a digital media offering. Traditional Listening to what customers tell about quality media businesses typically have a ‘one to of service and what is really important to them many’ content strategy which needs to be provides great insight, but the approach also completely pivoted into a ‘one to one’ content needs to focus on customer behaviour. proposition in a digital environment. Ability to Ethnographic research methods, such as identify a user’s content tastes and engage shadowing and diary studies, are proven to with the user on a one to one basis is both a successfully augment tried and tested significant opportunity and challenge for qualitative and quantitative research methods media organisations. and provide valuable insight when thinking about the products and services of the future. Key trends which have a significant implication on content consumption patterns are: • Change in user demographics from digital savvy youth in top cities to a more mass abc 123 demographic across geographies and socio Qualitative Quantitative economic classes research research • Increasing data speeds leading higher usage

of long form content 01010101010 10101010101 Data • Ethnographic Growing regional consumer base 01010101010 analytics research 10101010101 • A mobile first consumption model 01010101010 10101010101 It is therefore imperative for companies to understand their target audience, discover and recognise the importance of transforming A customer’s journey very often digitally to avoid losing their existing crosses multiple channels and this customers to more-engaging competitors. should be considered when carrying However, having said that, content alone can out customer research for digital no longer determine exclusivity or strategy differentiation, the overall packaging and services would build a compelling product for When customers interact with companies, they viewers. often interact with a range of channels to execute what they need to do. Thus, even when designing a digital strategy, the Customer research – the foundation of customer research should encompass all digital businesses possible channels including digital, to ensure alignment with the organisation’s overall When designing a digital strategy, it is distribution strategy. important to understand the following from customers: • What are the current customer journeys when interacting with the organisation? • What do customers think are the ‘critical interactions’ or ‘moments of truth’? • Do customers have appetite to be digital? • How do customers behave in the context of digital • What are the latest digital trends affecting existing and target customers?

33 The ‘Digital First’ journey 34

Phase 3 – Business design Once the customer proposition is created, it is important to evaluate internal capabilities and modifications to the current operating model.

Operating model

Digital capability model

Digital capability model Operating capability model In order to proceed with the digital A holistic digital transformation encompasses transformation journey, assessment of existing implementation of an organisation-wide infrastructure capabilities and requirements is operating strategy that links the capabilities a must. Considering OTT players are working across the front, middle and back office of a in tandem with technology players to enable company as well as create experiences that seamless access to their products and satiate customer demands. However, digital offerings across multiple touchpoints, a operating strategy cannot be developed in a number of options need to be evaluated and silo-ed way, but shall rather talk to the existing shortlisted across the below categories at this systems and processes. This makes it critical stage: for the leadership to evaluate: • Device support • How business organises around digital • App/web development • Alignment to customer segmentation • Digital enterprise • Operating model design to realise required capabilities • Social media • Channels/products/services • Customer, operational analytics • Insource/outsource/partner options • Optimise/grow/defend/acquire • IT architecture impacts • People capabilities and skills • Potential cannibalisation of the traditional business

34 35 The ‘Digital First’ journey

Phase 4 – Execution planning state. Based on the definition of success, it is critical to also identify the appropriate KPIs to The final phase before execution is developing measure success. For example, if viewership is a detailed rollout plan for the digital one of the key determinant of success for an transformation process. This phase can OTT player and rather than focusing on KPIs broadly divided into two components - such as video views, repeat views, user Programme design and execution plan experience, feedback, resolution time, the A core element to assess before rollout is to company only stresses upon financial matrix determine the measure of success. The such as cost to serve, then the end outcome definition of success varies based on the expected will not be achieved. overall digital strategy and the desired end

Programme design

Burn rate Scoping • Problem statement • Solution options • Benefit case Target operating model Programme • Shared vision architecture Product Product risk of future • Org, People, Process, working model controls, Information, Application, Technology Risk management Execution and outcome risk rollout planning management

Reduction of uncertainty due to

Execution/outcome Execution/outcome risk risk management through programme design

Source : KPMG in India's analysis

Prior to embarking on the digital • Ensuring a common understanding of transformation rollout, it is critical to think requirements and solution by structured through the following elements to enhance walk-through at an architecture level. success potential of the: • Planning the detailed delivery mechanisms • Identifying the areas of uncertainty in the of the engagement. project in terms of open questions, implicit assumptions and prerequisites, and planning how to address them. • An explicit verification of the project risk register against predetermined categories to provide a standardised registry of open questions.

35 The ‘Digital First’ journey 36

Designing successful digital Execution plan programmes is about getting three In order to ensure effective execution of digital elements right: strategy, special emphasis needs to be laid on When a digital strategy reaches this point of the following: maturity and funding is approved to mobilise a • Risk identification, mitigation, proving and change programme, it follows the same control: A company shall identify and programme design disciplines as other assess key business risks that might emerge programmes of change in an organisation i.e. owing to business transformation, and a getting the foundations in place for a proper risk mitigation and control plan programme to be set-up for success. should be put into action. • Customer impact assessment: All the use case shall be considered to avoid any adverse impact on customer experience owing to the company-wide changes. • Delivery, flexibility, speed, governance: To build a sustainable digital business, Digital Foundation capability programme organisations not only need a digital design strategy but also require a cultural shift, agile operating model and flexibility for driving continuous innovation. Digital methods

Key pillars of digital transformation 01 02 Digital first Organisation-wide change Innovation focussed mindset Integration across organisational DNA Innovation is not a choice anymore. Strategy to transform that need to be For digital innovation to be holistic and inclusive of all business successful, it is pivotal for the segments and functions, including the leadership to assess their business front, middle and back offices. through a number of lenses — technology, business strategy, future gap analysis, and digital road map

Content security Analytics Data protection and IP security Data analytics

With companies embracing digital Data analytics is paramount for transformation, security has become even understanding customers and more critical. It is important to safeguard data improving portfolios and cost across systems, devices and the information structures on the cloud. 04 03

36 37 The ‘Digital First’ journey

Digital first and innovation 2. Accelerator programmes: Accelerators focussed mind-set assist early stage start-ups with financing and mentorship in a fast-track mode, Innovation for a digital company is not a providing intense, immersive education to choice any more but perhaps is the only help them accelerate the life cycle of young ‘business as usual’ way to go forward. It is companies within a few months.5 While imperative for business owners to carve out some start-up accelerators operate in India, specific teams focussing on this impending global M&E conglomerate Disney also runs change and drive transformation across the an accelerator ‘Disney Accelerator’ that organisation. According to the survey of 131 provides select companies the access to CEOs in India in 2017 conducted by KPMG the creative expertise and resources of the International, 60 per cent organisations plans Walt Disney Company to help them to make significant investments towards develop innovative products and services.6 innovation led transformation over the next It is a lucrative situation for both media 2 three years. companies and start-ups, as the former gains access to innovative ideas and Setting up incubation centres to drive solutions, while the latter gets the much- innovation needed guidance and financial support. Being a comprehensive activity requiring 3. Government-funded incubation centres: significant changes to a business, digital The Indian government has launched transformation has driven many organisations several initiatives to support and incubate to set up or seek support for their incubation budding start-ups in the country to help centres to focus on turning innovative ideas them scale up their businesses up to a into viable business models. According to the certain required level, in addition to National Business Incubator Association, 88 providing them space to operate from.7 per cent of organisations that have graduated For instance, the Government of Telangana from incubators remain in business after five is supporting AVGC sector; it is planning to years, while only 20 per cent of start-up set up an incubation centre called businesses, generally, survive in the real ‘Innovation in Multimedia, Animation, world.3 Gaming and Entertainment’ (IMAGE) in The objectives of these incubation centres Hyderabad, which would provide an ideal include helping an organisation achieve a environment for businesses in the vision for the future, a culture of innovation, an animation, visual effects, gaming and 8 agile operating model, an appropriate trade-off comics industry. The Government of between foundational investment and short- Gujarat is also pursuing investments to term wins, and an appropriate use of emerging launch an AVGC lab in the state, aimed at technologies to improve customer, employee providing a technological boost to the 9 and business partner experience. Incubation sector. Under the Start-up India Action centres can exist in multiple forms. Plan announced in early 2016, the central government would provide funding 1. In-house incubation centres: In-house support and incentives such as tax incubation centres perform the same tasks exemptions, in addition to incubation as any other external incubation centre; assistance through industry–academia however, they are typically set up as an partnerships. independent unit entrusted with developing innovative solutions to specific business issues. For example, in 2013, Arena Animation, the animation, web designing, VFX and multimedia education arm of Aptech Limited, launched its in- house incubation centre to identify industry needs and adapt its trainings accordingly.4 5. What Start-up Accelerators Really Do, Harward Business Review, March 2016 2. Disrupt and Grow – India CEO Outlook 2017, KPMG in India, 6. https://disneyaccelerator.com/, as accessed on 15 September August 2017 2017 3. ‘Central tech opens new business incubator’, Central Tech, 12 7. Government certifies 20 companies as incubators under Startup February 2017 India, Economic Times, July 2016 4. Arena Animation, Bangalore launches in-house incubation and 8. Image Policy 2016, Government of Telangana, 2016 outhouse production studio, Vedatma Animation studio, 9. Development of an AVGC Lab, Government of Gujarat, January Animation Xpress, April 2013 2017

37 The ‘Digital First’ journey 38

4. Third-party innovation labs: An innovation The core of the philosophy is based on lab is a space where partners from the defining ownership and establishing a private sector, NGOs, academia, stewardship model to implement the plan. government ministries, civil society and Stewardship is the key to successful youth come together to co-create solutions implementation and stewardship is the guiding for the most pressing challenges.10 These process that bridges business and users; innovation labs help organisations to — executives and technology. The stewards cultivate ideas into commercially viable oversee the implementation of the tools, products, profile new capabilities, solve manage the data integration and provide the business challenges in new ways, gain training and management for the introduction awareness of the marketplace and gain of new workflows and business processes. access to technology, people and skills, Organisation-wide digital operating strategy and specifically developed smart assets and capabilities. To fully realise the potential of a digital solution, bringing a paradigm shift just in the In 2017, Paypal launched two innovation way viewers consume content is not enough, labs in India, in Chennai and Bengaluru, to however an organisation wide change is support innovation across multiple areas required. According to KPMG in India’s CEO including machine learning, artificial Report 2017, 65 per cent organisations have learning (AI), Internet of Things (IoT) and aligned their middle and back office processes virtual reality/augmented reality (VR/AR).11 to front office operations to reflect a more customer-centric approach.12 Integration across organisational DNA Organisation structure and reporting Established traditional media companies need to carry out internal changes so as to craft structures that can support digital transformation. The organisational structure needs to be flexible to promote cross pollination and to drive synergies. The governance structure should be such that it establishes the principles and policies from the hierarchy of stakeholders. It should clearly identify the homeowners of the information, map the wants of every owner, define the performance KPIs, establish collaboration and communication between teams, and manage dependencies.

10. Innovation Labs, UNICEF, October 2012 11. PayPal launches two tech Innovation Labs in India, Economic Times, August 2017 12. Disrupt and Grow – India CEO Outlook 2017, KPMG in India, August 2017

38 39 The ‘Digital First’ journey

Digital transformation disrupting the capabilities across • Mobility • Consumer analytics • Payments • Support functions – IT, HR, etc. • Advertising and marketing • Process automation technologies • Digital labour • Customer journey mapping • Content centres • Personalised products and • Talent acquisition and experience development

Front-office Middle-office Back-office

• Content development • Content management • Content supply chain • Content processing and sharing

• Transforming the front-office • Transforming the middle-office Companies cannot get by just on the back of Improving efficiency and reducing time-to- good content, and thus media companies market are key focus areas of today’s CEOs. and content providers have been striving to Thereby, media companies have been nurture superior relationships with integrating technology solutions —such as audiences by investing in a number of front- content delivery networks (CDN), content office technologies. While mobility management systems (CMS), cloud technologies are being leveraged to allow platforms, mobile video optimisation, video viewers’ access to content across devices compression and encoding, supply chain such as smartphones, tablets, gaming virtualisation, etc. — across the value chain. consoles etc., players are also using These solutions are benefiting media analytical tools to capture real-time businesses by allowing them to integrate customer data. With the evolving digital production management, digitally share payments ecosystem, companies are also assets across locations, automatically trying out innovative business models, archive data sets, centrally controls leading to new avenues of revenue versions, process content on the fly, digitally generation. In addition, ad technologies package and catalogue content. This in turn such as geo-targeting and programmatic allows media companies to offer an ads are also being used for added value to enhanced user experience through higher the advertisers. picture quality at a much lower bandwidth across different sized screens. Digitisation of On the whole, continued investments in the entire content supply chain simplifies digital front-office technologies would form the efforts of content owners, thus the road map to innovation, leading to high- maximising the monetisation opportunities quality user experiences through tailored for media companies. content, improved viewing recommendations, more personalised and pertinent advertisements, better viewer engagement and new possibilities of distributing and monetising content more efficiently.

39 The ‘Digital First’ journey 40

• Transforming the back-office: associated with legacy systems and processes cannot be ignored either. The businesses have The gaps in back office operations could invested a lot of time, money and manpower question a company’s ability to fulfil to develop these systems and processes, demand or offer desired consumer which, till date, are delivering value and experience. The back office transformation creating a differentiation/niche for the business —involving digitalisation of core functional in the market. It is critical for businesses to departments, process automation, digital identify how best the legacy systems can be labour, digital contact centres, etc. — helps leveraged. companies reduce expenses, improve compliance, and increase overall productivity. While robotics process Data analytics automation (RPA) is helping media companies to automate repetitive Analytics is one of the most important pillars processes, cloud is enabling easy for a digital OTT organisation processing and inter-department movement The consumers and their engagement on an of data. Cloud allows companies to design OTT platform essentially defines the long-term and standardise innovative business success of the players. To drive very functions for their existing back office engagement, it is imperative to understand products. Data as a service along with every facet of the consumer, right from how mobility solutions enable employees to he/she navigates through the platform and access data anywhere anytime, which in what he/she likes watching to eventually turn enhances employee productivity and predicting what category of content will appeal helps company scale its back office to the target audience. The role of data operations. Further, the integration of analytics to answer these questions is technologies such as artificial intelligence paramount, and organisations need to and cognitive computing are helping with effectively leverage the mountains of costs. consumer data to arrive at actionable insights.

Technology integration Data analytics – Insights across the OTT Digital technologies are changing the business journey landscape, however some organisations fall With the rapid growth in OTT video behind compared to others owing to consumption, companies have to contend with challenges pertaining to legacy systems. multiple challenges around what to do with the Legacy systems do pose a number of data. Some of the key considerations are challenges, including: outlined below: a. Migrating older data and processes from • Data capture and integration – Integration legacy system to a new system of massive amounts of data generated b. Integrating new technology functionalities across the platform starting from customer such as security demographic data to activities likes clicks, views, shares. c. Testing digital technologies or third-party APIs on legacy systems • Platform reach – With multiple distribution models and touch-points through which a d. Involving big data analytics in business consumer can interact with the OTT value decision-making chain, an integrated view of which modes of For a digital start-up, the probability of scaling reaching the customer are proving to be up business operations is quite high as against effective will help improve the long-term traditional businesses that have been operating prospects of the platform. in the industry for decades now. This is for a • Consumer acquisition – To effectively simple reason that the legacy processes and acquire target consumers while effectively systems of the latter define the extent of utilising costs is something that the plausible business transformation rather than platforms are looking to find ways around. the other way around. However, the value

40 41 The ‘Digital First’ journey

• Knowing the consumer – In an environment Data analytics - Technology framework where a consumer wields the absolute The typical data analytics framework across an power when it comes to the choice across organisation encompasses the following: competing platforms, companies need to have a clear understanding of consumer • Quantify – Upload and segregation of data behaviour, preferences along with into identifiable patterns institutionalising advanced analytics around • Understand – Insights on ‘why’ a particular demographic and channel segmentation. behaviour is being observed, using • Content insights – Amongst the most advanced big data and machine learning important aspects of any OTT platform is techniques content strategy, and understanding the • Model – Identify target groups and motivations behind a consumer watching a predictive modelling of potential behaviour particular category of content. The insights i.e. ‘How will the consumer behave’ thus derived could potentially be used as inputs for future content creation decisions. • Implement – Put hypothesis into practice • Dynamic revenue models – OTT and capture actual consumer behaviour monetisation models are continuously • Measure and refine – Validate hypothesis evolving with even ‘traditional digital’ and refine outcomes through a virtuous mediums like YouTube advertising likely to cycle. see stagnation in terms of CPMs. With migration of consumers towards mobile and other online platforms, identifying the right set of consumers for potential upsell and providing advertisers with insights for their spends is of paramount importance.

3 2 4 5 1 Subscriber/ Machine Recommendations Tracking and Data upload Audience/ learning and campaigns reporting Programme scoring

Structured and unstructured formats Campaign 1 (TG1)

Campaign 2 (TG2)

Campaign 3 (TG3)

Raw media Algorithms analyse The algorithm calculates a A target group + control Results of implementation data is loaded vast amounts of score on each viewer at group is made available for and integration for target in real time to data, detect patterns Individual/Household retention or up-sell activities. and control groups are platform. and automatically level based on multiple tracked automatically. learn from criteria. Timely update of experience. scores

Measure & Quantify Understand Model Implement refine

Source: KPMG in India analysis, September 2017 Note: TG refers to Target group

41 The ‘Digital First’ journey 42

Data analytics evolution across an • Level 3 – Early adoption – Insights around organisation ‘why’ something has happened (descriptive analytics) and teething issues around Media companies have varying levels of company wide deployment of analytics adoption of data analytics, which defines the tools ‘data maturity’ level they are at • Level 4 – Corporate adoption – • Level 1 – Nascent stage – Characterised by Operationalisation of big data, predictive minimal awareness and importance of data; analytics and emerging mind-set of and basic issues around collection and analytics being essential to gain a warehousing of data competitive edge with respect to the • Level 2 – Pre-adoption – Starts off with competition understanding the need for analytics and • Level 5 – Maturity – Digital first mind-set involves initial investments in analytics institutionalised across the organisation, infrastructure and education across the decision-making driven by data insights, organisation human capital buy-in and a continuous culture of data driven innovation

Nascent Pre-adoption Early adoption Corporate adoption Maturity

Pre-big data environment Educate and explore Engage Execute

Knowledge gathering developing Ad Hoc and End users get results of adoptions and Highly tuned infrastructure + can start operationalizing big data Low awareness of value + No real strategies and roadmap Foundational Analysis established programme executive support

Involvement Use of all types of data (Including real-time) Restricted to what has Issues with data warehousing Homework phase happened Gain insights Basis of decision making Investment in Using predictive Departmetecnthnoal sclogopye Departanalyticsmental scope Lack/outdated analytics Precise product

Incorporated into 5

3

4 1 2 recommendations business processes Determine top business Varied forms of data used,

problems Level

but lack of integration Level

Level Level Decisions yet to be Level data-driven Realization that analytics is a Participation of Lack of inter competitive differentiator CIO team Department Infrastructure, data and analytics deploym intertwined completely • Improper data warehousing • Usually the longest phaseent • Commercialization distribution standards, storage structures • Experimentation mindset • Initial database established • Functionality as per enterprise standards • No data management • Stage for collection of data Building of innovation teams strategy from big data sources • Operationalization of unified • Big data ecosystem robust architecture with backup/recovery • Efforts required for data • New infrastructure support procedures Data shared across departments of governance • Analytics approach in place maybe organization • Lack of analytics - basic hybrid in nature • Unified architecture analytics insufficient • System installation, configuration and maintenance • Data not well managed • Data quickly analyzed and streamlined Analytics seen as competitive • Usually within marketing and compliance into logical infrastructure weapon and collaborative factor department • Lack of meaningful and • Support for analytics strategy/ insightful analytics • Analytics integrated with business process • Untapped unstructured data advanced analytics

Ad hoc Foundational Competitive Differentiating Breakway

Organisation Infrastructure Data management Analytics Governance Strategy

Source: KPMG in India's analysis, September 2017

Data protection and IP security experience for consumers, broadcasters-run and pure-play OTT platforms are opting for The importance of content security the highest levels of content security Viewers are looking for a fast and secure online incorporated within the core of their business media viewing experience irrespective of the operations and across several delivery devices and location, protecting online media platforms. content is a multifaceted challenge for digital media platforms. With technology opening up OTT platforms facing challenges around new avenues of content delivery to consumers, control over consumer endpoints the threat of digital content piracy is a major concern. As the OTT space expands across The rise of digital viewing has rendered the demographics, organisations need to be more conventional measures that companies have diligent about protecting their intellectual relied upon to contain piracy, obsolete. In property and content. contrast to networks managed by broadcasting companies, the digital space lacks centralised The frequency and intensity of cyberattacks in control over the security of endpoints, such as India has increased, due to which content is set-top boxes. under a constant threat. This has made it mandatory for companies to address and manage cyber-risks. To ensure a smooth

42 43 The ‘Digital First’ journey

Consequently, the service provider’s control apps, peer-to-peer file transfers, through cloud over the devices used to decode, distribute and storage, and sharing and access allowed on consume content is significantly reduced. In social networks. addition, the shift from operator controlled endpoints to user-selected devices reduces It is thus important for OTT platforms to companies’ involvement in important security leverage technology that delivers content decisions. securely to users’ devices so that not only the authorised viewers can access the content, but To control and manage a multi-platform and multi-service space, digital content providers to also ensure that the content cannot be must embrace a holistic security approach to downloaded or shared illegitimately. address the security requirements on any type of content (live or on-demand) on any device. Watermarking and pirate monitoring Different approaches can be employed right from the source of content origin to the means While dealing with content piracy at the server of distribution. The idea is not to resort to just and the application level could be effective, it a defensive tactic but also search for ways to may not be a fool-proof method of protecting implement an end-to-end framework of content. For instance, stream and screen content security. capturing tools help pirates capture the video that is played on the screen. Insertion of digital watermarks to video content can be used to Content security interventions required across narrow down on the source of the content all touch-points leakage which feeds the redistribution Securing content at source helps limit the streaming servers. instances of security breaches. Hence, Another important element around cyber adopting end-to-end content protection security technology is to monitor pirate technologies such as intrusion detection services. Companies can employ cyber-security systems, audit trails as well as technologies vendors that work with the rights owner, that control physical access to server facilities national authorities and ISPs to take down become critical for organisations. illegal servers. Further, a major chunk of users prefer to It is also critical for companies to address the stream OTT content on smartphones and timing of rights windows. Companies must tablets. However, natively installed apps on control concurrent access to streamed content such devices come with a number of risks such at the subscriber account level and exercise as sensitive content leakage, insecure content control over offline content access and transmission and unprotected data storage. downloads. This poses the risk of data sharing between

The elements of content security framework

Source: KPMG in India’s analysis, September 2017

43 The ‘Digital First’ journey 44

Phase 1 – Context setting • The physical security layer – Operationalisation of physical security is a The first phase revolves around a review of the critical element which helps guard against content acquisition and monetisation strategy unauthorised entry into secure areas for a along with the content management model, to digital OTT organisation. The elements identify areas where content security policy around the physical security layer are design is to be enforced. The tools and methodologies to be enforced are centred on – Asset Tagging and Labelling, Transport access rights management, security controls, and Facilities security systems, Alarms and content storage and archival procedures. and Keys implemented at vulnerable locations, Access controls, Systems and Phase 2 – Content security realisation area authorisations and installation of This is a critical phase which defines the set of monitoring systems processes governing the content security • The digital security layer – While physical across a typical OTT platform. The processes security is the first layer of security control, comprise of: implementing security measures across • Core content processes electronic devices helps build a second layer of digital security, making the systems – Content Acquisition and Development, robust in nature. The digital layer comprises Transfer and Broadcast, Distribution and of the following elements Sales, Access and Rights management and Content Storage and Archival – Firewalls and Network security, Input and Output device security, Digital content • Content security processes library security management, Content – Content Control and Exception tracking and transfer, Authentication Management, Vulnerability assessment servers, Server connections to outside and security process design to address vendors and partners. the same • IT processes Conclusion – Media Inspection and Classification, We are now in a constant change environment, Media storage assessment, Security which compels organisations to rethink their Monitoring, Business Continuity processes and strategies frequently. Digital management processes in the case of transformation is not a one-off project. Any content breach eventualities and Content business contemplating digital transformation Backup strategies would have to regularly assess the digital evolutionary path and desired digital end state. • Incident management processes The success of digital transformation is – Response to Security incidences and ascertained in large measure by the company’s command chain for response, risk ability to keep pace with technological management procedures encompassing innovation, changing customer expectations detection, assessment and mitigation and last but not the least top management’s ability to drive a fundamental change in the Phase 3 – Content security operationalisation organisation’s DNA. Digital can no longer be treated as an additional function, but digital The last phase is about putting into practice strategy is rather intrinsic to business strategy the processes outlined in Phase 2 • Management systems – Content security Management Systems are put in place which define the entire security organisation, right from awareness at executive levels to incident teams and the protocols to be followed in case of security breaches and kicking in the business continuity and disaster recovery procedures

44 Pivoting traditional IT function to digital

45 The ‘Digital First’ journey 46

The execution planning exercise for a digital governed and managed. A well governed IT transformation is the final activity for organisation synchronises the business and operationalisation of the actual pivot of a technology aspirations while a well-managed traditional technology organisation into its IT environment ensures consistency in delivery digital avatar. The digital transformation for via reference architectures (business, data, OTT platforms while being a business application & technology) and leverages both prerogative, has inherent technology IT & OT (operating technology). The objective underpinnings. The digital transformation process for an OTT player is a strategic shift is to ensure visibility and interdependencies of with customer centricity at the core realised via each IT component (process, application, persona profiling, on-demand digital content, services, data and infrastructure) across the and personality/demographics based landscape. suggestions, provisioned smoothly across a multitude of devices in an omni-channel Two nodal frameworks for digital environment. Delivering such a tailored experience necessitates a technological enablement architecture that is agile, flexible and scalable Digital enablement is not accidental in nature on demand and technologies that are easy to and hence mandates careful planning and implement and that give quick insights for course correction. Therefore, to ensure that the decision-making, especially around content organisation is digitally enabled it is imperative strategies. that the CIO/CTO draft a Digital Strategy in conjunction with the Enterprise IT strategy with For the enablement of such an orchestration, it dedicated budgetary allocations. is imperative to have an IT environment that is

• Internet of Things • Customer analytics • Workplace of future

• Digital distribution • Digital/Social/Mobile • Millennial disruption enterprise • Digital content • User experience management • Sales transformation • Journey based digital • Unified media ERP • Customer experience strategy optimisation • AI based content curation • Enterprise mobility • Operational reporting

• Big data and analytics Digital • Digital strategy Technology • Product/service positioning Digital Enable the driven and extension driven internal and disruption transformation external • Scenario-based planning customer

• Workforce • Enterprise architecture • IT strategy analysis/optimisation • Technology business • Target operating model • Offshoring/ management design Nearshoring • Service management • Application • Outsourcing rationalisation • Application/Infrastructur • Continuous e rationalisation • IT governance and organisation change oversight Next-Gen A modern • IT asset management Technology

Enterprise IT Enterprise target • Managed governance innovative integration • Tools enablement and integration operating • Tech-biz management platform model (TOM)

Source: KPMG in India's analysis, September 2017

46 47 The ‘Digital First’ journey

Digital operationalisation Digital operationalisation for a VOD platform could be realised via key themes based on the customer experience, digital interventions (niche products), content creation, advertising automation and enabling architecture. Enterprise and digital architectures are the core building blocks of the ecosystem. The themes in unison provide an engaging experience to the customer.

Key themes for digital transformation

Digital architecture • Digital architecture definition • Digital intervention operationalisation via transition architectures Customer experience

• Personalised customer experience as per Enterprise architecture personas • Consistent omni-device experience • Business architecture definition • Intuitive UI/UX • Data and BI architecture definition • Application architecture definition • Technology/infrastructure architecture definition • Architecture governance Next-Gen Digital architecture Digital interventions • Selection and prioritisation of key customer experience enabling Ubiquitous data exchange digital interventions • Device agnostic, service based data Automation Digitisation transfer and exchange • Governed data environment Workflow digitisation (customer centric)

• Use-case definition and prioritisation Business workflow automation • Core business process automation Logic and asset digitisation • Architecture governance process • Asset inventory digitisation automation • Logic digitisation and decentralisation

Source: KPMG in India's analysis, September 2017

47 The ‘Digital First’ journey 48

Digital strategy and architecture It is critical to remember that digital realisation transformation impacts not only the technology landscapes but the traditional and The digital vision for OTT platforms and its supporting business units as well; and as such consequent digital strategy is at the core of any it entails business process reengineering transformation exercise. Based on the digital activities that impacts the key stakeholders, strategy and its needs, business, digital and KPIs and the very cultural fibre of an data requirements are determined which organisation. So a change management translate into respective views. Each of these exercise is indispensable to ensure that the views constitute approach building blocks and changes are understood and assimilated by all in unison get translated into the respective the stakeholders of the transformation. architectures.

Change management Change management

Digital vision

Data/information requirements Information and data views

Exchange package and model architecture

Data/information organisation design

Source: KPMG in India’s analysis, September 2017

48 49 The ‘Digital First’ journey

Key technology components disrupting the media industry

04 • Highly scalable systems to manage peak loads smoothly 05 • Cost effectiveness • Tapeless workflow management • Customer 360 • Collection, storage and analytics 05 • Advertising opportunities across large datasets Big data • Operational efficiency • Dynamic content analytics 04 monetisation Cloud computing 03 01 Digital content Content 03 management curation • Hyper customised content • AI/machine learning driven content 01 suggestions Content • Coherent content creation, storage, review and discovery approval, and broadcasting workflows 02 • Integration with disparate sources of content via a self-service platform from external sources 02 • Ability to interact with centralised and/or • Dynamic metadata tagging decentralized media based on content • Support and integration with niche content shown/spoken processing platforms • Deep search capability • Support for digital and traditional distribution • Dynamic content restructuring based on the device, bandwidth and granular user preferences

Source: KPMG in India's analysis, September 2017

49 The ‘Digital First’ journey 50

Digital realisation architecture The typical media value stream

Media asset flow

Media life Pre- Post- Multiplatform Experience Production cycle Consumption production production distribution integration management

Workflow Collaboration Metadata Distribution Customisation/ Rich indexing Consumption planning enablement analytics orchestration personalisation

Information flow

In a rapidly evolving digital environment, Meanwhile, the media trade is reworking, consumer behaviour is shifting from traditional making the most of the employment of TV based scheduled programming to an OTT business IT-based functions and infrastructure based on-demand viewing, creating new that modify media services to be delivered as necessities for tomorrow’s media design cloud-based services instead of as options of revolving around digital consumption. vertically integrated systems.

Infrastructure

Wireless Fixed Line Mobile Cable Others LAN

Broadband transport (web protocols)

Services

Video Voice Music Gaming Messaging Others

Content owners, aggregators, service providers

The media services design allows an extremely streams and VOD content to consumers climbable, robust, secure and economical connected via mounted or mobile IP networks. atmosphere for the delivery of live/linear

50 51 The ‘Digital First’ journey

Key interconnects with enterprise but it does not interfere with the physical OT/IT world. While communications has always been a part of scope for IT, traditionally OT has not Operational Technology (OT) acts in real time been considered a networked technology. OT on physical operational systems to manage is now getting modernised through converging media life cycle, i.e., from pre-production to with IT with required considerations for consumption. Whereas, Information maintaining security for critical infrastructure. Technology (IT) is the whole technology stack, This convergence provides multiple including the hardware infrastructure and advantages as set out below: software applications used to transform data

Lower cost of ownership for technology through standardisation Greater automation with effective . OT and IT integrate multiple digital governance extended across IT and OT channels and provide smooth omni- domains channel experience to end users. . Technology governance creates a structure . The framework is completely modular in for aligning business strategy with digital order for multiple tools and technology to strategy and helps in identifying opportunities work together reducing the operation cost and prioritising activities and providing increased scalability of . It facilitates ways to measure the solutions based on actual business needs. performance and the business benefits being delivered, and establishes clear and Increased speed of consistent standards for people, process and implementation for digital projects technology to follow . Companies need to become skilled at faster More effective asset management through delivery of digital projects to meet changing customer expectations predictive, condition based maintenance . Core IT project delivery principles such as . Effective asset management needs well-defined reusable micro services, API- monitoring of actual condition of the assets to based interfaces, interoperable data, spot upcoming failure and decide when and services and processes, metadata, etc. are how maintenance needs to be done, also leveraged to achieve faster implementation known as Condition Based Maintenance and deployment of digital solutions. (CBM) using certain indicators and metrics to identify signs of decreasing performance or upcoming failure Increased project effectiveness through a coordinated Increased productivity through approach across the whole integrated planning and scheduling, organisation data to support leading practices and . With lesser time allocated for project development, geographically spread advanced process controls project teams and involvement of multiple . The workflow includes the processes of parties, communication and coordination is channel planning, scheduling, critical segmentation, rights management, etc.

51 52 The ‘Digital First’ journey

52 Key considerations for digital implementations

53 The ‘Digital First’ journey 54

Digital transformation can be a two edged Execution sword – if not implemented right then it can Digital initiatives are seldom unified across the lead to low return on investments or even organisation. In a number of instances, losses. Below are some of the key learnings organisations adopt a modular approach to while implementing digital initiatives. digital transformation and do not commit the entire organisation to the process. While in the Leadership involvement short-term, this may be cost effective and More than 50 per cent of the time, digital minimise operational disruption, in the transformations are driven by executives other medium to long-term, this is likely to be highly than the CEO or the CDO and do not get top inefficient as it can put the organisation at risk leadership support . of missing the market opportunity, due to the lack of a collective organisational digital Digital transformations typically cut through transformation focus. various functions (eg. sales, marketing, etc.) and stakeholders both internal and external. If Adoption a C-level leader is not involved, then typically collaboration between functions and groups Several digital implementations lack a change becomes difficult and the digital management plan due to which the investment transformation process is disrupted due to the in the digital initiative turns sour. It is critical to deadlocks on decision-making and lack of have a 100 day plan to start with and a strategic view. continuous programme and governance structure to make the change stick. Planning Expectations Lack of digital planning creates multiple version of truths. In an ideal scenario, with It is important to define the expected outcome digital planning carried out from an from a digital initiative at the beginning of the organisation’s perspective right from the implementation process. The KPIs identified outset, the organisation would not need to rely should be measurable and continuously on multiple sources of partly automated data. tracked to measure the performance of a particular digital initiative.

2. Based on industry discussions

54

Acknowledgement

We would like to thank the entire team at KPMG in India for their efforts in developing the report. Apurva Dixit Dev Khandwala Jasleen Taneja Karan Dasaor Neha Pevekar Priyanka Agarwal Radhika Goel Raahul Gautam Rasesh Gajjar Sahil Koul Sameer Hattangadi Sanjeev Bhar Sharon D’silva Shilpa Taneja Shveta Pednekar Sutirth Dasgupta Vibhor Gauba The ‘Digital First’ journey 1

KPMG in Indiacontacts: FICCI contact:

Mritunjay Kapur Leena Jaisani Partner and National Head Asst Secretary General & Head Strategy and Markets Media & Entertainment Leader – Technology, Media and Telecom FICCI Media & Entertainment Division T: +91 124 307 4797 T: +91 11 2373 8760/70 E:[email protected] E:[email protected]

Girish Menon Co-Head Media and Entertainment T: +91 22 6134 9200 LA India Film E: [email protected]

Himanshu Parekh Council contact: Co-Head Media and Entertainment T: +91 22 3989 6000 Lohita Sujith E: [email protected] Director Corporate Communications Aditya Rath T: +91 22 6139 7000/02 Partner E: [email protected] Digital T: +91 22 3989 6000 E: [email protected]

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