The ‘Digital First’ journey How OTT platforms can remain ‘on-demand ready’ October 2017 KPMG.com/in © 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Disclaimers: • All product names, logos, trademarks, service marks and brands are property of their respective owners • The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. 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KPMG in India thus disclaims all responsibility or liability for any costs, damages, losses, liabilities, expenses incurred by any such person / party arising out of or in connection with the report or any part thereof. • By reading the report the reader shall be deemed to have accepted the terms mentioned above. © 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 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 © 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wiwithth KPMG InternationalInternational Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4 © 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wiwithth KPMG InternationalInternational Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5 Foreword The era of on-demand content collective energies of all is here. Consumers are stakeholders towards a single increasingly accessing media minded ‘Digital First’ cause, is outside the confines of their of critical importance. couches and within the It is this journey towards a comfort of their personalised digital organisation that we Girish Menon 5+ inch screens. Moreover, are outlining in this document. Co-Head that screen is no longer Right from telling the digital Media and Entertainment restricted to the elite as video story to the internal KPMG in India is going mass at a rapid pace stakeholders to implementing and as the consumption the digital architecture on grows, the OTT consumers ground, each step holds the will demand seamless access key to survival and potentially, to services, compelling stories success in the market. and value for money. To deliver the same, platforms would require an intuitive Himanshu Parekh understanding of what the Co-Head consumers want, without the Media and Entertainment users having to ask for it. 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 as the preferred platforms for consumers. To achieve a market leadership position, an Leena Jaisani internal organisational Assistant Secretary General & transformation initiative, Head – Media and Entertainment which aims to harness the FICCI © 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wiwithth KPMG InternationalInternational Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6 Executive summary © 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wiwithth KPMG InternationalInternational Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 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. © 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 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