Entertainment Goes Online A $5 BILLION OPPORTUNITY The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for- profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with offices in more than 90 cities in 50 countries. For more information, please visit bcg.com. ENTERTAINMENT GOES ONLINE
A $5 BILLION OPPORTUNITY
KANCHAN SAMTANI
GAURAV JINDAL
November 2018 | The Boston Consulting Group CONTENTS
3 EXECUTIVE SUMMARY
4 ONLINE VIDEO Exponentially Growing Phenomenon in India and Globally
20 INDIAN CONSUMER GOING ONLINE FOR ENTERTAINMENT Insights from Consumer Research
39 INTERNATIONAL OPPORTUNITY FOR INDIAN CONTENT Serving the Indian Diaspora
43 REALISING THE OPPORTUNITY Six-point Agenda for the Industry
49 APPENDIX
53 FOR FURTHER READING
54 NOTE TO THE READER
2 | Entertainment Goes Online—a $5 Billion opportunity EXECUTIVE SUMMARY
he past decade has seen a transformation, global, in how Tconsumers watch videos and listen to music. From the days of terrestrial broadcast and social viewing of television to highly person- alised, small screen consumption - the media industry is witnessing a transformation like no other. The rate of change in the industry continues to accelerate, with hyper-competitive dynamics coming into play in India. In addition to the traditional players, there is a strong push from global and more nimble companies to get into the over the top space. At the same time, India’s appetite for entertainment continues to increase as high speed broadband connectivity, ease of payment options and availability of multiple platforms the right environment for consumers.
Powered by a first-of-its-kind consumer survey, this report seeks to ad- dress the changing Indian consumer, learnings from other global mar- kets, niche areas such as internationalization, music and regional act- ing as the key strategic imperatives and the agenda which can drive success in a market with a potential for $5 billion.
The Boston Consulting Group | 3 ONLINE VIDEO EXPONENTIALLY GROWING PHENOMENON IN INDIA AND GLOBALLY
lobally, OTT has become the key tage of using OTT service is that it is less cost- Gdriver for video and media consumption ly and more efficient and customized for spe- growth, with an increasing number of people cific consumption. consuming over the top (OTT) content through varied platforms. In the last few years, OTT content, which is video is deliv- The Global OTT Opportunity ered over the Internet as an alternative to The global OTT opportunity has been pegged traditional media, has seen substantial at ~USD 76 billion for 2018 (as shown in Ex- prevalence compared to conventional video. hibit 2). Such a large canvas allows both Revenues from OTT content have seen a SVOD (subscription video-on-demand) and CAGR of over 40 percent for the period AVOD (ad-supported video-on-demand) mod- 2005-2017 and are expected to grow by 20 els to thrive and even co-exist. The United percent in the period 2017-2023. In compari- States and Canada dominate the OTT market son, Public TV, FTA TV and Pay TV have seen due to better connectivity which facilitates growth rates of 2 percent, 1 percent and 6 OTT app circulation, in addition to the avail- percent, respectively, in the period 2005-2017. ability of high-speed connectivity, the pres- ence of established content creators and pro- viders in the region and the significantly A Plethora of Services and higher costs associated with more traditional Devices are Driving OTT modes of media consumption (like PayTV) Adoption, Globally which has made OTT a more cost-effective A key factor perpetuating this growth in con- solution. sumption of OTT content is the fact that a considerable part of OTT content is delivered over smart and mobile devices (as shown in APAC—Growing at a Fast Clip Exhibit 1). Key players are giving an addition- The OTT market is growing rapidly in al fillip to this demand by investing in inno- Asia-Pacific (APAC), Europe, the Middle East vative technology and developing original and Africa (MEA), and Latin America. There- content exclusively for OTT consumption. fore, OTT platforms in these regions have Furthermore, broadband connectivity has in- immense scope for enhancement. Asia Pacif- creased its footprint globally. Hence other In- ic is expected to be the fastest growing mar- ternet-enabled devices including smart TVs, ket for OTT content during the forecast peri- STBs and gaming consoles can also be used od 2017 to 2022 (as shown in Exhibits 2, 3). for the provision of OTT services. The advan- This is primarily attributable to the increas-
4 | Entertainment Goes Online—a $5 Billion opportunity EXHIBIT 1 | A Plethora of Services and Devices are Driving OTT Adoption
2006 Apple TV Jan-07 Netflix Netflix switches The iPhone from DVD to iPhone 2007 Jan-07 revolutionizes VUDU streaming movies mobile Jun-07 Sep-07 connectivity Roku hulu 2008 May-08 Feb-08 Android Hulu Plus created Oct-08 paid subscription 2009 for streaming current TV content
Apple iPad hulu plus 2010 Mar-10 Nov-10 Google TV Amazon Instant Oct-10 Amazon Video released in 2011 Prime video 2011, rebranded Feb-11 to Prime Video in 2015
2012
2013
Amazon fireTV Apr-14 2014 Sling television Non traditional Jan-15 AndroidTV streaming Inexpensive Jun-14 HBO NOW services offer live and linear streaming devices Chromecast 2015 Mar-15 make every TV a programming Sep-15 PlayStation Vue smart TV Mar-15 2016 DIRECTV NOW Nov-16 YouTube TV Mar-17 2017 hulu with live TV Trend - sports May-17 streaming services going FI TV Pro direct to 2018 Jun-18 Facebook Watch consumer Jun-18 DAZN ESPN Jun-18 Apr-18
Source: Press Runs, BCG analysis.
The Boston Consulting Group | 5 ing number of viewers as consumers adapt The Indian OTT Phenomenon, and get used to OTT consumption and a Already Large, So Far Additive steady but significant rise in local content Not Cannabilizing creators and providers. It is also driven by Overall, it is estimated that 16 percent of me- the rest of the enablers (connectivity, pay- dia consumption in India is already on digital ment ecosystem, device availability) coming platforms. Relative to developed countries, together. India is lagging. However, for the Indian youth, already 25 percent of media consump- The Indian media industry seems to be an tion is digital (as shown in Exhibit 4). This in- outlier relative to more developed markets in dicates that digital growth in India is likely to terms of ad growth and penetration. This gap catch up. creates an opportunity for India to grow from its current levels. As per our estimates, India There is a distinct difference in the shape of reaching China / Brazil levels implies 6 per- digital consumption in India. Relative to tra- cent CAGR + GDP growth (5-7 percent), i.e. ditional TV and print, digital consumption in 10-13 percent CAGR for the next 10 years for India has been additive and not cannabiliz- the overall media industry. ing traditional media consumption. For e.g. in the past one year (between 2016 and As more people spend a larger portion of 2017), overall media consumption grew for their time in the digital realm, it is inevitable all segments of consumers. Among digital that advertising goes digital as well. While consumers, the total consumption grew more traditional media, with an overall share of 84 rapidly while the consumption of traditional percent, continues to be the media of choice media did not decline substantially (as for consumers, India is seeing an increase in shown in Exhibit 5). This indicates the ro- the share of digital in media consumption (as bustness of the underlying consumer trend shown in Exhibit 4). This will most likely im- in India—there is headroom for overall me- pact the growth of digital advertising. dia growth with digital media growing more
EXHIBIT 2 | Global OTT Market is a ~ $76B+ Pie With Both SVOD and AVOD Models Co-existing
27% GROWTH IN OTT MARKET, APAC ROUGHLY 30% THE SVOD PROJECTED FOR 22% IN 2017-22F GLOBAL OTT MARKET
CAGR CAGR ('17-'22F) (%) ('17-'22F) (%) 141 141 126 9% 31% 126 8% 9% 110 19% 19% 110 93 +27% 93 47% 22% 76 29% 24% 76 57 57 43 43 32 32 23 45% 20% 23 43% 16% 17 13 17 13 2012 2013 2015 2016 2017 2014 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F 2018F 2021F 2019F 2020F 2022F
TVOD SVOD AVOD Other Europe APAC NAMR
Sources: Ampere analysis, Magna Global, BCG analysis.
6 | Entertainment Goes Online—a $5 Billion opportunity EXHIBIT 3 | APAC is a fast Growing Market for OTT
NORTH AMERICA EUROPE ASIA PACIFIC
$61B +16% $56B 10% $50B $41B +24% $43B $36B 5% 40% $37B +19% $27B $31B $24B $26B $29B $21B 12% 54% 15% $18B $20B $14B 39% 38% $14B $11B 8% 50% 16% 41% 49% 59% 40% 47% 43% 33% 2017 2017 2017 2018F 2019F 2020F 2021F 2022F 2018F 2019F 2020F 2021F 2022F 2018F 2019F 2020F 2021F 2022F SVOD ARPU $10.5 $7.6 $3.2 2018E
SVOD AVOD TVOD
Sources: Ampere analysis, Magna Global, eMarketer, January 2018, BCG analysis.
EXHIBIT 4 | Digital Video Consumption in India has Become Sizeable and Very Relevant
DIGITAL MEDIA CONSUMPTION BY COUNTRIES INDIAN YOUTH IS AT 25%
Share of digital in media consumption (2018E) (Hours/week)
11% 16% 15% 18% 25% 20% 22% 31% 25% 39% 38% 34%
89% 84% 85% 82% 75% 80% 78% 75% 69% 61% 62% 66%
USA UK JPN RUS CHN BRA IND 72+ 54-72 39-53 24-38 <23
Age group
Digital media Traditional media
Sources: PQ Media, BCG analysis, Digital advertising includes search, video, display, social media.
The Boston Consulting Group | 7 sharply. This is in stark contrast to developed brands. These OTTs have a combination markets where OTT has captured share from of ad supported and behind the paywall traditional media. content. This is unique to India—Indian broadcasters have been quick off the block and hence well-entrenched in the The Indian OTT Space is Already OTT space. Hyper Competitive With All the Ecosystem Players Vying for •• Global OTTs like Netflix, YouTube, Consumer Attention Amazon Prime have extended their services into India. Historically, YouTube Indian OTT space is hyper competitive and set the trend for online video watching has attracted varying types of players which among Indians. In recent times, other offer varied value propositions to the con- global OTTs have started investing in local sumers and have different business models. Indian content in a significant way.
There are multiple business models evolving •• In addition, the telcos e.g. Airtel, Jio and in India (as shown in Exhibit 6). Vodafone-Idea are building aggregator models- aggregating content across •• All large successful broadcasters in India multiple platforms and providing a have launched their own OTT platforms payment interface. They are also leverag- e.g. Hotstar, Voot, Sony Liv and Zee 5. ing access to other OTTs as a differentiat- These broadcasters have put their exten- ing factor to drive consumer retention and sive TV content libraries online, supple- acquisition. mented by additional content through licensing and originals. In India, these •• We are also seeing independent OTTs players enjoy a strong brand and consum- evolving, being supported by content er awareness driven by their strong TV creators.
EXHIBIT 5 | Digital has been Additive to Overall Media Consumption in India
2016 2017
Time spent on accessing media (Hrs/day) Time spent on accessing media (Hrs/day)
+62% +61%
1.7 1.5 (42%) (41%) 0.7 0.7 0.7 (26%) 0.6 (17%) (31%) (17%) 1.8 1.5 1.5 1.6 (74%) (69%) (42%) (41%)
Non-internet users Internet users Non-internet users Internet users
Digital1 Print TV
Sources: BCG CCI Digital Influence Study 2016, 2017 BCG analysis (N=18,000). 1Digital - Respondents accessing internet for non-work related purpose.
8 | Entertainment Goes Online—a $5 Billion opportunity EXHIBIT 6 | Indian OTT Market is Hyper Competitive and has Attracted Various Players With Different Business Models
Broadcaster OTTs Telecom OTTs
Hotstar Zee5 Voot Airtel Jio Vodafone
Sun NXT SONY LIV
Global OTTs Social Media
Netflix YouTube Facebook Twitter
Amazon Prime video HOOQ
Distributor OTTs Others
Tata Sky DishTV EROSNOW Viu ALT Balaji
Hathway(Ditto TV) Sun NXT Hoichoi TVF YUPP TV
Source: BCG analysis.
•• Social media platforms continue to be an 8). The need to differentiate to attract eye- important source of video consumption, balls is enabling aggressive bets on original and social media players are leveraging content. this by increasing their focus on video content. We have analysed the types of investments being made on OTT content across platforms. •• Traditional TV distributors (cable, DTH) are These investments are in very varied forms of also experimenting with different models to content with different propositions (as shown participate in the digital media space. in Exhibit 9) e.g.
Most of these players and models have •• “Tent poles” or “hero content”: Heavily evolved and entered the market in the past marketed, premium content (higher cost five years. The year 2017 saw the first burst of production)—meant to bring new of “big money” being deployed behind Indi- eyeballs on the platforms. an content on OTT. Heavy investments in multiple players are now underway The num- •• Hit movies—Expensive to buy, but attract bers of players in the Indian OTT market has eyeballs. witnessed a 3.5x increase in the last six years growing from just nine players in 2012 to 32 •• High profile sporting events. in 2018 (as shown in Exhibit 7). •• Syndication of international content. Investment for original content by OTT play- ers is increasing at a fast clip. In addition to •• Original content / web series (Hindi, live sports rights, the nature of shows pro- English and regional): build up library of duced is also evolving—tent pole properties differentiated content. built for OTT cost three to four times that of traditional TV content (as shown in Exhibit •• CAC (Content around content) specifically
The Boston Consulting Group | 9 EXHIBIT 7 | Heavy Investments in Content by Multiple Players Also Already Underway, No Longer "Just Lip Service" as Market Clearly Important
NO. OF PLAYERS IN THE OTT MARKET HAVE 2017 INVESTMENTS (IN INR CRS) FOR INCREASED 3.5X TIMES IN THE LAST 6 YEARS ORIGINAL CONTENT BY OTT PLAYERS
ErosNow 4000 CR INR1 Hotstar Hotstar (~$300m)
HOOQ 500 – 600 CR INR (IPL Rights Netflix Airtel TV ($70-80m) for 5 Years) Lattu SONY LIV MUVIZZ Jio TV Kids Amazon 500 CR INR 9 32 Prime video (~$70m) 2013 2014 2015 2016 2017 2018 # OTT # OTT players players ~ 400 CR INR hungama Netflix ALT Balaji Sony LIV (2012) (2018) (~$55m) Amazon myplex Prime video Hoichoi ~ 400 CR INR TriplePlay ErosNow TVF! Sun NXT (~$55m) Arre Zee 5 VIU YUPP TV 120 CR INR ALT Balaji Asianet (~$16m) Voot
Sources: Ovum OTT tracker, Media Reports, BCG analysis. 1Factor of winning bid for digital rights assumed to be same factor as winning global bid.
EXHIBIT 8 | Cost of Content Significantly Increasing as OTT Platforms Bet Aggressively on Originals
• • •
• • •
• • •
• • – • –
• • •
Source:
10 | Entertainment Goes Online—a $5 Billion opportunity EXHIBIT 9 | Different Types of Content developed and syndicated by OTT platforms
Inside Edge, Sacred Games, Orange is the new Black, Stranger Things
IPL, Premier league, FIFA Dunkirk, Raazi, World Cup Russia 2018 Masaan, Udta Punjab
Ghoul, Comicstaan, Gangstars, As I'm On Air AIB suffering from Kadhal
The Big Bang Theory, Bigg Boss Game of Thrones
Jio Cricket, Bigg Boss, KBC Source:
EXHIBIT 10 | Competition for User Share is Intense
32%
27% 22%
11% 5%
3%
Sources:
The Boston Consulting Group | 11 around reality TV, sports and others also free viewers into paid subscribers. Efforts covered on traditional TV. were also made to have a deeper engage- ment with “free users” in an attempt to cre- ate more watch-time and therefore ad-sales Intense Competition among opportunities. Video Apps: Race for the Top Three Positions The Chinese SVOD model enabled by a Most consumers (81 percent) have up to three “paying members watch first” model that video / OTT apps on their smartphones (as was successful to get Chinese consumers shown in Exhibit 10 on previous page). Fur- to pay for content—consumers are generally ther, all platforms struggle with retention of more inclined to pay for exclusive content. consumers—on an average 50 percent of OTT The Chinese developed a “paying members apps installed are uninstalled in the first sev- watch first” model that created exclusivity en days of installation. The competition for and enticed non-paying members to start user share is intense—every OTT platform is paying for exclusive content. The four-step vying to be among the top three of the con- process of this model are as follows: sumer’s attention. 1. Free access to all users to the weekly release of a single new episode. Lessons from the Dragon Nation Case-Study: China—Content driven 2. Free users are teased with trailers of SVOD growth episodes to be released in future weeks. It would be instructive to observe the evolu- tion of the OTT landscape in China. In both 3. On the other hand, paying members are India and China, OTT is unlikely to be driven given instant access to future episodes by consumer price advantage. In the United which may sometime comprise an entire States, the average revenue per user (ARPU) season per month is USD 89 and USD 11 for Pay TV and SVOD, respectively. In contrast, in China 4. After the shows completes all its weekly and India the ARPU for Pay TV is USD 3 releases, all the episodes except for the while the ARPU for SVOD is USD 3 and USD first one become exclusive to paying 2, respectively. When compared with other members. more evolved markets like the United States, Canada and Australia, the gap in what con- Led with few big bets, built watch-time sumers in India and China are willing to pay with cheaper content library—in order to for online content is significant. stay ahead in the OTT game, players need to constantly invest in creating original content Interestingly, china has witnessed an expo- (as shown in Exhibit 11). However, in order to nential growth of over 200 percent (2014- be profitable, these investments need to be 2017) in SVOD subscribers. Over a mere five- done judiciously, keeping in mind the prefer- year period, >35 percent of its OTT revenues ences of the target audience and their incli- are from subscription services. nation to pay for exclusive content. The Chi- nese model got this right by making a few The Chinese Strategy—Giving legs to large investments in non-exclusive content SVOD Growth and building watch-time with a cheaper con- Top players leverage AVOD users base to tent library. create hits and drive SVOD conversion— good quality original content lies at the Heavy original content investments trig- heart of the OTT industry. A heavy push was gered the huge SVOD uptake—the main made by AVOD / SVOD platforms to build factor that perpetuated a huge uptake in new categories of “web series” that would SVOD was heavy investment in creating origi- allow for the manufacturing of hits and nal content. The ubiquity of technology and higher user engagement. These “hit” shows consequently access to a large amount of con- were used as a vehicle to drive conversion of tent makes it difficult for content providers to
12 | Entertainment Goes Online—a $5 Billion opportunity EXHIBIT 11 | Led With Few Big Bets, Built Watch-time With Cheaper Content Library
IQIYI example
TV RIGHTS PURCHASE CURRENT # OF PROFITABILITY/BENEFIT FOR FUTURE PRICE ($/EPISODE) TITLES IN LINEUP VIDEO PLATFORM INTENT
> $5M • 30% shows profitable 3-5 series (>$750k) • Break even on ability to improve traffic
$3–5M 10-15 series • 60% shows profitable Stay put ($450-750k) Non-exclusive licensed library $1.5–3M • Mostly unprofitable 20-30 series ($225-450k) • Limited ability to improve traffic
< $1.5M 10 series • 70% shows profitable (<$225k) (not incl. indies)
> $5M • Can bring in millions of paid users 2-3 series (>$750k) (The Lost Tomb brought 3.5M)
Platform $1.5–5M exclusive ~5 series ($225-750k) Originals
< $1.5M • Dual income from paid and ad sales ~10 series (<$225k) • 60% shows profitable
Source: Press Runs, BCG analysis. attract and retain the consumer’s attention. offline fans activities. Moreover, they fre- The number of original series for the top quently organize celebrities to interact with three players in China has been consistently fan on the platform in real-time, to attract increasing and has risen from just 13 in 2012 and retain users. iQIYI Paopao also serves as to 143 in 2016 (as shown in Exhibit 12). a key publicity platform for video content, in- cluding inviting popular actors of original Using Social Media to Drive Fandom and / drama series to interact with the fans in the or Fan Engagement—Social media is used “Celebrity is Here” section of the platform to to connect fans with celebrities and bring boost the content’s popularity. them closer to the content and the content creators. Any social media platform helps In addition, with enabling mobile pay- strengthen the connection between fans, ce- ments and telecom infra, subscription has lebrities and the content, consequently en- over-taken advertisement revenues for hancing user engagement and stickiness. the top players—for any industry to thrive, a supportive eco-system needs to be built Paopao, for instance, is a social platform built around it. A robust digital and telecom infra- and used by iQiyi. iQIYI Paopao features a structure was instrumental in giving a fillip wide range of social functions. Within each to the OTT industry in China. It has been topic of interest, fans can generate content by noted that a 26x increase in mobile payment posting texts, images and videos, as well as value coupled with a 4.6x increase in broad- interact with others through features such as band speed between 2013 and 2014 enabled commenting, giving ‘likes’ and private mes- strong revenue growth in the industry, espe- saging. By virtue of its social media nature, cially for subscription-based revenues (as iQIYI Paopao serves as a base for online and shown in Exhibit 13).
The Boston Consulting Group | 13 EXHIBIT 12 | Heavy Original Content Investments Triggered the Huge SVOD Uptake
(10m VIPs (2X of Descendants), 1b views in 1 week – global record )
(Attracted 5m+ VIP subs) st Cost/series $(M) (0.8m VIPs added in 1 hour) (2.6m VIP subs, 2.7b views)
Sources: Note 1
EXHIBIT 13 | In Addition, With Enabling Mobile Payments And Telecom Infra, Subscription Has Over-taken Advertisement Revenues For The Top Players …HAS 4.6X INCREASE IN BROADBAND SPEED …
Indexed, 2013 (to 100) Revenues ($M)
Sources: – Note
14 | Entertainment Goes Online—a $5 Billion opportunity India is Potentially at an Inflexion creased nearly ten-fold (as shown in Exhibit Point for OTT Growth 15). This unprecedented growth has largely Several drivers for growth of OTT in India are been driven by media consumption on mo- falling in place: bile. While on-the-go consumption of content is simple and efficient, the launch of Jio has •• Improving connectivity and fall in data also made it affordable, creating a latent de- prices. mand for digital consumption by the Indian consumer. •• Increased smartphone penetration.
•• Favourable demographics (age, affluence). Increase in Smart Phone Penetration •• Increase in supply of content. Over the last five years, India has witnessed a tremendous growth in TV and smartphone It is estimated that by 2020, India will have penetration. This growth has been more of a more Internet users than the population of the global phenomenon as smartphones have be- G7 countries combined (as shown in Exhibit 14). come an integral part of every individual’s life. Today, there are 3 billion smartphones across the world, of which the Indian market Improving Connectivity and Fall accounts for over 450 million (as shown in in Data Cost Exhibit 16). When it comes to television, Access to affordable data has perpetuated a smart TV has evolved over the last couple of sharp growth in the consumption of data. The years, freeing the customer from dependence launch of Jio heralded a new era of afford- on the set top box or cable for content. Con- able data in the country. It has been observed sumers now have the choice to watch content that post the launch of Jio in September 2016, on the web or on a mobile app or on their the quarterly consumption of data has in- smart TVs.
EXHIBIT 14 | India Already has more Internet Users than USA and By 2020, # of Internet Users in India Will be More than G7 Population
Number of people (Million)
6 6 6 6
I I P
Source: RAI BC CCI D 6.
The Boston Consulting Group | 15 EXHIBIT 15 | India Saw Content Consumption Exploding With Data Usage Exponentially Increasing as Jio Launched and Prices Dropped
DA A CONS ED PER SER B S. AR ER DA A CONS P ION B PRICE PER B
6
6 4
4 S 6 6 6 D R B
Sources: I 6 RAI BC .
EXHIBIT 16 | Tremendous Growth in TV and Smartphone Penetration has Been Witnessed in the Last Five Years With More Scope for Growth From Rural India
4 6
6 6 6 66
6 HH 64 HH HH HH
S
HH 6 HH HH 4 HH
6 S 6
4
Sources: I A I O BARC BC . . S .
16 | Entertainment Goes Online—a $5 Billion opportunity Supply of Content ability of smartphones, has led to a spurt in When most OTT platforms first made their the consumption of online content. entry into the market, they started off with catch-up shows. However, the entry of global In addition, there is a democratization of In- players like Netflix and Amazon Prime Video ternet access taking place which will expand that brought with them a plethora of rich, the consumer sets (beyond just metro, male, original content, has now compelled existing millennial), and penetrate into rural India (as Indian players to move beyond just catch-up, shown in Exhibit 18). syndicated and licensed content. The entry of Netflix also indicated that the Indian consum- The rural story in India is likely to be even er is now ready to pay for compelling content. more interesting. There are an estimated 197 million households with a TV, of which 160 Availability of a wide variety of content has million are (cable and satellite) households— attracted a large number of people across the while smartphone penetration is in multiples country with differing sensibilities and choic- of that and growing. Given the challenges of es. With a growth in viewership, share of on- electricity availability, TV screens and C&S line video advertising is also set to increase. connections, it is possible that rural India will adopt OTT even ahead of C&S viewing in some pockets. Our estimate is that by 2020 Favourable Demographics nearly 50 percent of Internet users in India India is witnessing significant shifts in in- will be from rural India and rural Internet come distribution patterns with a rise in “af- penetration could grow to as much as 35 per- fluent and elite” (as shown in Exhibit 17). cent (as shown in Exhibit 19). This creates a With increasing urbanisation, we are seeing a very healthy environment for OTT to take off shift in demographics as more and more peo- in rural India. There is a strong possibility, ple become upwardly mobile. This, coupled given prices and penetration, that rural India with increasing connectivity and easy avail- may be an OTT first market.
EXHIBIT 17 | Significant Shifts in India's Income Distribution with the Rise of “Affluent and Elite”
N BER AND O HO SEHO DS IN DI EREN INCO E BRAC E S
Annual gross HH income1 (Per Annum ($)) 6
E 4 6. .4 . .
A 6 . .4 .
A 4 . 6 . .4
N 4 4 . 4 46 . .
S . .
Number of HHs 4 6 (in mn) X HH 6
Sources: CCI C I D 6 BC CCI . I .
The Boston Consulting Group | 17 E I I rofile of sers to o e ond 's—Metro, Males, Millennia’s
PEOPLE WHO WE THINK USE INTERNET IN INDIA… E RO A E I ENIA S 4 RS
6 4 6
… BUT PROFILE OF INTERNET USERS WILL BE BEYOND 3MS BY 2020
NON E RO E A E NO SO O N
4 6
4
Digital consumer’s profile is well beyond the stereotype! I 6 I Source: BC CCI D I S 4 6 N BC CCI . I .
e t a e o nternet sers ill e ro ral n ia, ill ontri te to o t e ro t in e t ears FUTURE ROWTH IN RURAL INTERNET USERS 0 OF INDIA S INTERNET ROWTH IN NE T 3 SHOULD BE SIMILAR TO WHAT HINA WITNESSED YEARS IS E PE TED TO OME FROM RURAL INDIA A FEW YEARS A O
nternet sers Million ral internet enetration
0 Million 2
2 2 3 0 Million hina 200 20 3
2 3
33 0 India 20 2020E 20 2020E
Urban Rural
Source: B Digital influence study 20 NNI reports – 200 20 3 TRAI March 20 B analysis
18 | Entertainment Goes Online—a $5 Billion opportunity illion e otential o t e n ian Mar et in ears
e en es
Source: Note
Just the Tip of the Iceberg As the market evolves, the phenomenon of We believe that the Indian OTT market is second screen, privacy etc. will surface more poised for growth and both ad-supported and strongly. Consumer are likely to continue to consumer pay models will continue to co-ex- have few apps on their phones that are ac- ist. The consumer pay model could take tively used. Consumer pay models will evolve many different shapes ranging from pure driven by supplier actions and consumer be- OTT SVOD to a telco-driven aggregator mod- havior. However we believe that in India el as well as TVOD, particulary in categories AVOD, SVOD, TVOD etc. will all co-exist and such as films and sports. It is expected to serve different consumer needs, while con- reach a market potential of $4.5 to 5 billion sumer pay models will grow faster than by 2023 (as shown in Exhibit 20). However, ad-supported ones. tapping this potential will require a host of player actions to fall in place; these include availability of relevant differentiated content, development of regional markets and many others. They are described in the next section of this report. As content evolves and be- comes differentiated, we believe that con- sumer pay models will evolve further in In- dia—with SVOD becoming a substantial part of the market.
The Boston Consulting Group | 19 INDIAN CONSUMER GOING ONLINE FOR ENTERTAINMENT INSIGHTS FROM CONSUMER RESEARCH
ver the last few years, consumer This transition of today’s consumer towards Obehaviour in India has witnessed several increased watching of video opens a major major upheavals. opportunity for OTT players who can provide highly immersive and engaging viewing expe- From a cost-sensitive, middle-income demo- riences. In order to decode the size and shape graphic, the country is now more affluent, of the OTT opportunity, a detailed consumer with a concurrent preference for conve- research (n=5000) and analysis of Nielsen’s nience, as a key driver Almost 60 percent of smartphone panel (n=15000) was undertaken. urban consumers prefer saving time over The objective of the research was to gain in- money. By 2025, India’s two leading income sights around consumer behaviour on the segments will double and account for 40 per- triggers and objectives for OTT usage, pat- cent of all consumption. With increasing terns of actual usage and how those are reach and influence of Internet in India, the evolving, to retention and churn behaviour. general profile of Internet users is also wid- The in-depth qualitative research also threw ening. Research suggests that by 2020, Inter- up insights on the content and genre prefer- net penetration among users in non-metro ences of consumers. cities will reach 77 percent, with 40 percent of viewers being female. This is propelled primarily by the mass adoption of smart- Insights from Consumer Research phone technology. This isn’t simply because The consumer research threw up many inter- smartphones are perceived as a modern ne- esting insights. Many data points confirmed cessity—55 percent buyers report purchas- our hypotheses while others challenged them. ing a smartphone for an ‘upgrade’ factor, without any real need or ‘push’ (as shown in The following are the top six consumer insights Exhibit 21). from the research, and their implications.
1. Three archetypes of consumers based on Online Video Viewing has been their current usage patterns—TV heavy the Highest Growth Category (“traditionalists”) ~60 percent of our In less than a year, the time spent on video sample; AVOD-heavy (OTT experiment- has jumped 11 percent, even as smartphone ers) ~30 percent of our sample; and users spend incrementally less time on social SVOD-heavy (the early adopters) ~10 media, browsing, gaming and calling (as percent of our sample (as shown in shown in Exhibit 22). Exhibit 23).
20 | Entertainment Goes Online—a $5Bn opportunity e n ian ons er is an in
• • • • • •
Sources:
i eo trea in is t e i est ro t ons tion a on art one sers in n ia
ate or Q2 ’17 Q2 ’18
Source:
The Boston Consulting Group | 21 ǟǟ Experimenters using AVOD heavily— watch some types of content on the to watch on the go, create a “second large screen still after experimenting screen” in the household, and fulfilling with mobile usage specific watch occasion of “snacking in break times at work” / “while 2. Despite the abundance of existing commuting” content, consumers seek greater variety in content, tailor-made to their specific ǟǟ SVOD installation driven by desire for needs; specifically, regional language popular / exclusive content as well as content is a key need voiced by ease of use consumers
ǟǟ Consumers seek “value for money”— 3. App combinations have a really long tail. with so much free content available Hence being in the top 2-3 apps will be demand justification for premium really critical for players to gain scale in charged by paid platforms. Hence, this market there is an overall discomfort (among both experimenters and early adopt- 4. “Hero” content is able to get consumers ers) against subscription charges. on the platform,but cannot retain all of There is a need to establish a distinct them value proposition for consumers so that they try services and then contin- 5. Awareness of available propositions ue to pay continues to be a challenge. There is a need to find ways to break the clutter ǟǟ Lapsing on AVOD driven by undiffer- entiated value proposition, high / 6. Music has traditionally not been a large hidden data usage, overall drain on opportunity, however, it does attract mobile battery and preference to eyeballs
ree r et es o ons ers
1 2 7 8 11 2 2
Source: Q: N=
22 | Entertainment Goes Online—a $5 Billion opportunity Three Archetypes of Consumers not justify the subscription charges. Based on Their Usage Behaviour •• TV-Heavy Users—The Traditionalists (~60 Exhibit 27 shows the genre preferences of percent of those surveyed) each of the archetypes—as being quite dis- tinct. SVOD usage only spikes for the third •• AVOD-Heavy Users—The OTT Experi- segment of “early adopters”, both the tradi- menters (~30 percent of those surveyed) tionalists and experimenters are not yet switching any significant viewing to subscrip- •• SVOD-Heavy Users—The Early Adopters tion platforms. (~10 percent of those surveyed) Freely accessing favorite content on In today’s market, SVOD is a more “metro” demand—Key driver behind choice of and higher affluence phenmenon; of the OTT Experimenters (AVOD primary traditionalist TV watchers are, 50 percent live viewers) in tier 1 & 2 cities (as shown in Exhibit 23). The OTT experimenters use the freely avail- able content of AVOD to explore the offerings The profiles below descibe a typical tradi- of the OTT space. The research indicates that tionalist / OTT experimenter / early adopter. on-the-go watching is a key reason for AVOD Traditionalists prefer watching their pre- use. ferred genres on a bigger screen, which is a key trigger for their use of TV. On-the-go On-the-go accessibility of content has al- watching is the key driver for OTT use, as it lowed these users to watch content when a allows access to their favorite content on de- television might not be available. OTT exper- mand. There is a demonstrated willingness imenters indicate that they heavily use to pay to access favorite content in high AVOD while traveling, creating a sec- quality, and subscribers tend to stop using ond-screen at home to watch when the TV is SVOD apps if they feel that the content does occupied and fulfilling specific watch occa-
a le ro ile— ra itionalist
• • • 8 • • • • 2 2 • • •
1 2
Source:
The Boston Consulting Group | 23 —
• • • 22 • • • 2 • • •
1 1 2
Source:
—
• • • 8 • • • • • • "I can’t even think of when was the last time I did a download, eca se I watch eve thin that I want to I a fo the content, eca se of the eas availa ilit of it "
1 2 Source:
24 | Entertainment Goes Online—a $5 Billion opportunity EXHIBIT 27 | Preferred Platforms for Genres for the Three Archetypes
Sources Q N= High: sions such as watching in short breaks during replace them with other apps (as shown in work (as shown in Exhibit 28). The discon- Exhibit 30). tinuation of AVOD is primarily driven by three reasons: the undifferentiated value Value-for-money—Key driver behind proposition of AVOD content; the inclination choice for subscription platforms against ‘small-screen’ devices as a viewing With so much content available freely, con- platform (after experimenting with these sumers who subscribe for video content seek platforms; and the high consumption of data value for the money they invest in SVOD. and mobile-battery life by AVOD apps (as Consumers want to conveniently access their shown in Exhibit 29). favorite content. Hence, when it comes to choosing SVOD apps, desire for popular and Eighty eight percent of consumers are aware exclusive content and ease of use of the app of atleast one more AVOD app in addition to drives installations (as shown in Exhibit 31). primary OTT ( which is Youtube in most While there is an overall discomfort against cases). There is also a healthy 48 percent trial subscription charges, in both the experiment- / uptake with consumers choosing to use ers and early adopters, ‘not value-for-money’ AVOD apps (as shown in Exhibit 30). Due to is the primary reason for the discontinuation the vast content offering on the many of SVOD apps. Research indicates that the top available AVOD apps, consumers are quick to reasons for deleting SVOD apps are high sub- move past the apps they don’t like, as scription charges, and better content, some- evidenced by the fact that over 25 percent of times with free access, elsewhere. Consumers AVOD users delete their apps in order to demand justification for the premium
The Boston Consulting Group | 25
Source Q N=
Sources Q: N=
26 | Entertainment Goes Online—a $5 Billion opportunity
1
88 8
Source N=
Source: Q: N= 1 22
The Boston Consulting Group | 27 charged by current OTT platforms, and •• Improve awareness—create broader hence, there is a need to establish a distinct recognition among consumers. value proposition for them to continue pay- ing subscription charges for content (as •• There is a 50 percent drop-off between shown in Exhibit 31). recall and trial / purchase.
The key drivers for subscribing to SVOD •• Improving retention / reducing churn platforms are access to favorite content, pop- important for sustainable growth of user ularity and curiosity—quite different from base. the reasons for which viewers install AVOD apps. The issue among consumers seems to In summary, consumer journeys are complex be one of “value for money”. Similarly it in- and evolving. They involve multiple decision dicates why many consumers do not sub- points both as triggers for use and discontinua- scribe to SVOD in the first place (as shown tion of use. It is clear that platforms need to in Exhibit 33). evolve and communicate a distinct offering to attract, and more importantly, continue to re- SVOD apps have a healthy consumer funnel, tain consumers. The Digital viewing behaviors with over 50 percent awareness (even when are similar across consumer demographics. awareness is more tightly defined as recall of However, it is clear that consumers are willing, atleast two SVOD apps) with over 25 percent able and increasingly experimenting with on- using an SVOD app in the last six months. Four line video viewing in the course of their nor- percent of the overall sample discontinued the mal day. India, therefore, is on the cusp on an use of their SVOD apps which is ~15 percent online view boom which is likely to become compared to those who have tried an SVOD the new norm—if players can create distinct app (as shown in Exhibit 32). The funnel indi- propositions. cates several implications for SVOD players:
1
2
22
Sources N= 1
28 | Entertainment Goes Online—a $5 Billion opportunity —
Sources: Q: N= 7
Regional Content as a Key Need already recognizing this opportunity by add- Voiced By Consumers ing specific regional content libraries to their With the diversity in India with its 22 official product offerings. languages, content in regional languages has al- ways been important. Historically, this prefer- OTT platforms have already started ence can be seen in the circulation of newspa- on the path to regional content pers. In the top 15 dailies (by circulation), seven Many OTT players are gearing up to tap into are regional newspapers. In the last decade, cir- the regional opportunity. OTT players exclu- culation of newspapers in Hindi and vernacular sive to regional languages and originals such language has grown at 8 percent, faster than as Bangla content-centric Hoichoi and Sun English dailies, which grew only at 2 percent, as NXT, which has a library in Tamil, Telugu and literacy numbers have climbed up across India. Kannada, have already begun to emerge. Content in regional languages is a part of the There are many OTT players that are current- lives of conumers today (as shown in Exhibits ly releasing originals in local languages. Hot- 34 and 35). star ran an original show in Tamil, ‘I’m Suf- fering from Kadhal, AltBalaji has original Strong preference for regional lan- shows in Bangla and Tamil, while SonyLIV guage content among consumers created shows in Gujarati (,Kacho Papad Pako In a survey of ~5000 consumers in India, over Papad,) and Marathi (Yolo). 40 percent of consumers said that they prefer content in regional languages, indicating the While some OTT players are already operat- strong preference for regional language in the ing in the local space, many global and broad- country (as shown in Exhibit 36). Consump- caster OTT players also have plans in place to tion of content in regional languages has al- invest in local content. Zee5 plans to release ready seen a tremendous increase, with in- 90+ originals across 12 languages by 2019, creasing demand and content offerings in and Netflix plans to release at least 10 origi- regional languages. OTT players in India are nal shows and movies annually in India. Am-
The Boston Consulting Group | 29 —
• • Doesn’t opt for • 22 • –“Again, not a lot of • 2 • • Doesn’t want to watch long • Kannada stuff” • Doesn’t want to pay as
1
Source:
—
A , KA ADA
D A • refers we series, o ies • ninstalls apps due to • riends in etro city • ursues Kannada content “If I unattracti e app interface and suggesting ra wal, a gi en a choice, prefer high loading ti e—“We new apps ccupation tudent Kannada only” cannot forward it as uch as • pecific actors and o ies– Daily screen ti e to hours • eeds su titles for other we want hose things “Wills Smith movie was south languages “Telugu and irritated me.” released wanted to watch apps etfli , A a on a il o ies do not • aced low storage space on that o ie o, y friend ri e, io understand in theatre ut, phone so uninstalled hea y subscribed for Netflix” De ices o ile, aptop those will e good o ies, if apps “If I run two apps at the • uriosity of e ploring new and ity angalore you go to online, we get sa e ti e, one app popular content su titles on A a on Prime” gets stuck”
latfor choice
A DA
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Any pecific onte t After reaching onte t ate night ho e fro college inge watching sessions illingness to pay pre iu ontent o ies, shows ontent o ies and and online clips we series latfor etfli , latfor etfli , ow igh A a on ri e, io A a on ri e, io creen ti e hour creen ti e hours
Source: n erson nter iew
30 | Entertainment Goes Online—a $5 Billion opportunity
eligious Spiritual ookery shows News laughter and comedy shows Talk shows Interviews Travel Shows Infotainment Kids artoons ocumentaries Information based Indian Serials T Shows eality shows game shows usic ideos riginal Shows Indian ilms ovies ovie trailers International Serials T Shows International ilms ovies ovie trailers Sports
Source: onsumer esearch analysis Q: What is your preferred language to watch each of these genres on any platform N= azon Prime recently announced a content li- tion only has a 4 percent user share. Similarly brary in Kannada, as the sixth regional the top 3-app combination has a 9 percent language to have a dedicated content library. user share, and the next 3-app combination has only a 3 percent share (as shown in Ex- In summary, there is a high latent demand hibit 37). The single app consumers are cur- for regional language content already in In- rently almost fully on YouTube. dia. If players invest well in this space, it will bring many more consumers into the OTT There are several implications for players: space who are perhaps consuming content to- day on the more traditional channels or •• Breaking the clutter to create a differenti- standing at the fringe. ated proposition that can enable them to be among the top 3 VOD apps.
App Combinations have a Long •• Chances for potential consolidation in the Tail—Need to be in the Top three long tail as apps fight to be the top three Apps to Gain Scale on consumers’ devices. The Indian OTT market is hyper-competitive and has attracted various players, from major This long tail of apps creates significant clutter, broadcaster-backed apps to apps that only ca- making it difficult to differentiate between the ter to specific regional content. content offerings of the various OTT players. Consumers today are quick to move past the Over 80 percent of users use three apps or apps they don’t like, and delete an unused app less, and the share of users using over four within seven days on average. These uninstal- apps is low and drops off. App-combinations lations are driven by the huge clutter. Aware- are diverse and have a long tail. The top ness of available propositions continues to be 2-app combination has only a 13 percent a challenge, and the discovery of new OTT share in users, while the next 2-app combina- apps and content will be clouded due to this
The Boston Consulting Group | 31 EXHIBIT 37 | Most Consumers have 1-3 Video Apps on Their Smartphone…
Rank Reach (%) Rank Reach (%)
… and app combinations have a long tail
Sources:
clutter. In this landscape, OTT players will the 11th season of Bigg Boss. SonyLIV first need to stand out to differentiate themselves. saw a surge in consumption with the start of In a space with an abundance of multi-content the 2018 FIFA World Cup, and also saw a OTT apps, players with ‘specialized’ content, surge when the 10th season of KBC began such as exclusively sports or exclusively kids, streaming (as shown in Exhibit 38). The in- content, will have an advantage and will be troduction of the play-along feature allowed more likely to stand out. Breaking this clutter a higher engagement of the audience for this and emerging as a top 3 app will be the win- show. ning agenda for OTT players. However, ‘hero’-content cannot retain users on these OTT apps post conclusion of the pre- “Hero” Content Can Get Consum- ferred show / content unless consumers get ers on the Platform But Does Not deeply engaged in other content on the plat- Retain All of Them form. The consumer survey indicated that 36 Consumption on OTT apps spikes dramati- percent of users who deleted SVOD apps cit- cally with ‘hero’-content such as the Indian ed that they stopped when as a specific show Premier League (IPL), Kaun Banega Crore- concluded as one of the key reasons, and over pati (KBC), etc. as ‘hero’ programs have a 40 percent mentioned finding better content very high demand among consumers. The as one of the key reasons. We arrive at a simi- usage of Hotstar doubled in April ’18, while lar conclusion for app-wise analysis Exhibit usage became 5x for Airtel TV, due to the 39 indicates this phenomenon among each of high demand and popularity of IPL. Voot the top 3 SVOD apps in India (Amazon saw a consumption spike with the release of Prime, Netflix and Hotstar Premium).
32 | Entertainment Goes Online—a $5 Billion opportunity
I W N I SS S T IP P I T K S S P NW S T N
Jul’18 Jan’18 Jan’18 Jun’18 Jun’18 Oct’17 Apr’18 Apr’18 Feb’18 Feb’18 Sep’17 Sep’18 Aug’17 Dec’17 Aug’18 Dec’17 Nov’17 Mar’18 Mar’18 May’18 May’18
irtel otstar Sony I oot
Sources: analysis Nielsen Panel of smartphones recorded from to . Notes: hange in consumption is measured by the change in reach of the app across months each defined as of app installers who use the app in the month IP Indian Premier eague K Kaun anega rorepati.
O A A 1 A A
etter content on ot er app te
Sa e content on app
Stoppe atc ng once ero content a over
Sources on u er e earc analy Q: at are your ey rea on to un n tall t e app N= 18 S OD lap er Note: App con ere are A a on r e ot tar re u an Net l
The Boston Consulting Group | 33 The smartphone panel data analysis also in- Exhibit 40). This indicates that SVOD pene- dicates a drop in the total installed apps post tration still requires a much higher marketing consumption of “hero”. There are only a few effort to build awareness and a differentiated illustrative examples only, which indicate that proposition in the mind of the consumer. the users who only used an app for a particu- lar program will tend to drop-off after the The awareness of OTT apps is different for program concludes. OTT players will need to various segments of population. Females, for ensure that their content caters to specific example, have lower than average awareness consumer preferences, to entice these con- of various OTT apps, for both SVOD and sumers into continued usage of the OTT app, AVOD (as shown in Exhibits 41 and 42). This even post the conclusion of the ‘hero’-content difference in awareness indicates that mar- by helping them discover similar content keting strategies will need to be tailored to which is likely to keep them engaged on the cater to the various population segments; platform for longer. this will result in a significant jump in aware- ness and a subsequent rise in the use of OTT apps. Marketing Challenge is High, Awareness Low for OTTs The low awareness of apps among consumers A key barrier for OTT players is the aware- poses a significant hurdle. The benefit of in- ness of the apps among consumers. vesting in content for relevant markets will not be realized if the content doesn’t reach While the overall awareness about AVOD the consumer. There is a significant need to apps among consumers is 80 percent, the increase awareness about the OTT apps and awareness about SVOD apps is only 54 per- content offerings. Overcoming the awareness cent. However, the awareness about trail / barrier will be key in realizing the $5 billion purchase is similar at 50 percent (as shown in opportunity of the Indian OTT Market.
T o er A areness is a rd e or SV a ers
Tota ons mer ase samp ed Tota ons mer ase samp ed road samp e ith road samp e ith
a e heard o at east t o AV apps a e heard o at east t o SV apps Aided re a Aided re a
a e sed at east one AV a e sed at east one SV app in the ast months app in the ast months
Are retained sers Are retained sers o an AV app o an SV app
Sources N
34 | Entertainment Goes Online—a $5 Billion opportunity
S OD MA S F MA S
1 un ver e 1 un ver e
a arene 7 a arene
7 tr al purc a e tr al purc a e
retent on 1 retent on
Source on u er e earc analy N 1S OD app con ere or t e analy are A a on r e o c o ot tar re u Net l an ee re u
A OD MA S F MA S
1 un ver e 1 un ver e
a arene 8 a arene
tr al purc a e tr al purc a e
retent on 1 retent on
Source on u er e earc analy N 1A OD app con ere or t e analy are A rtel o a one ot tar J o ne a Sony an oot
The Boston Consulting Group | 35 Music Has Traditionally Not been headway in this space (as shown in a Large Opportunity, However, It Exhibit 45). Does Attract Eyeballs The music market in India is evolving. India •• Over 50 percent of Google users surveyed has typically struggled with a device con- indicated that they are willing to pay for straint. However, with every smartphone be- music; this is really over-indexed com- ing used as a music playing device, this con- pared to all other forms of content (as straint has been lifted. While the market size shown in Exhibit 46). in revenue terms continues to be small, there are ~100 million digital audio streaming users In India, as in the case of video, regional con- in India already. There are 4 apps that have tent emerges as an important genre for music really gained prominence for music in addi- as well—though English and Bollywood domi- tion to YouTube, which serve the purpose of nate. This indicates that it is possible to create watch and listen (as shown in Exhibit 43). more niche offerings with music platforms (as shown in Exhibit 47). Accordingly, many players in the ecosystem are investing in music (as shown in Exhibit 44). In general, music apps have been seeing n summary, music can be an important a growing trend among smartphone users in I“layer on” opportunity for players. Digital India. There are a few distinct characteristics has already taken over from all physical re- of music apps emerging: corded music, album downloads, and mobile based personalization to emerge as the larg- •• Most music apps are “self-discovered” as est segment. However, consumer awareness is found in a Google survey. This highlights a low and there is a need for innovation in much higher need for awareness. Targeted marketing to really penetrate a newer set of marketing by music-focused players will consumers and bring into fold the “paying allow these players to gain significant consumers”.
—
Mu c
100 M 1.3 <$ 500 Mn avg o D g tal Strea ng n u try evenue trea ng app er n talle per u er
~35% 4 o ro t o pro nent g tal g tal trea ng trea ng app 1 erv ce
Source: F lobal Mu c eport 18 analy Note: All gure above are or F 17 1 pro nent app aana J oMu c yn Mu c an Saavn
36 | Entertainment Goes Online—a $5 Billion opportunity
Invests in A rtel yn Mu c ger lobal Invests in aavn J oMu c Invests in aavn A rtel launc e yn Mu c t ertel ann a F o 1 ree ong an t o Fun ng 1 ub cr pt on plan Fun ng 1 M ype Merger ype Ser e re Money aluat on 177M at onale re Money aluat on M ect ve Sta e 81 7 • lug l ely to ecl ne revenue ro caller tune at onale at onale • ncrea ng con u er • ro uct evelop ent nclu ng • ro t an e pan on o J oMu c propen ty or ut l ng a vert ng tec nology • Acce to Saavn’s or g nal ata • u to er ac u t on progra ng e pert e
1 1 1 1 18 Septe ber Apr l July February Marc
M Invests in unga a encent Invests in gaana co ntel ap tal M S N N Fun ng M Fun ng 11 M Ot er nve tor ntel ap tal e e er enture artner
at onale pecte to be Deploye n • ntegrate Hungama’s oD erv ce t M plat or • ro uct evelop ent nclu ng A • Acce to 7 content creator partner p an eng ne or per onal e eature 8 ov e n 1 language nclu ng n a l • a erv ce cu to er ac u t on an elugu
Source: runc ba e re Searc analy Note: oD eo on De an F Free age ol cy
s v m s g n m I don’t use any app sa an a sa an a a n n n m n s am a n n n g a
Sources: g nsum Su v ana s s Q: H u s a us ng a s u us s n ng mus N Note: ans n v
The Boston Consulting Group | 37
I e to e a e to I e ad ee I e e us e I e It as a ot o I not pay do n oad us e pe en e ontent e t e us us n y o us o na s e o endat ons an ua e
espondents a eady pay n o n to pay o us
Sources: oo e onsu e u ey ana ys s Q: o you pay o ntend to pay o us su s pt on I so at a e t e easons o pay n N Note: ans e ed one o t e o e
n s on s nd o y ood op us a a s t e e ona an ua es o e e s ons a e u u et
Source: n ne su ey o oo e use s Q: at nd o us do you ost y sten to N
38 | Entertainment Goes Online—a $5 Billion opportunity INTERNATIONAL OPPORTUNITY FOR INDIAN CONTENT SERVING THE INDIAN DIASPORA
nternational markets hold a significant Malaysia and the US to understand the Iopportunity for players in India. The innate demand for Indian content and consumer demand for consuming Indian content on preferences. The demand for Indian content in apps is already high as the Indian diaspora international markets is clear as the survey population of over 30 million is already indicated that over 50 percent of international consuming Indian content and is well attuned watchers pay for Indian content in some form to OTT usage and paying for content. We or the other, with ~15 percent paying over $20 conducted a survey among Google consumers monthly to access Indian content (as shown in (n=~2000) with viewers across UAE, UK, Exhibit 48).
a ays a
one I at on y ee Ind an ontent o e t an
Sources: oo e onsu e u ey ana ys s Q: o u oney do you spend a ont on a e a e on at n Ind an ontent N o o o a ays a o
The Boston Consulting Group | 39 The survey revealed a few stark facts: content is primarily through global OTT apps such as YouTube and Netflix (as shown in •• Low awareness of Indian OTT apps Exhibit 50). Users in international markets watch more on these OTT platforms than on •• Consumption of Indian content is TV. There is a sizeable opportunity at stake primarily through global OTT players here for OTT players to tap into the international markets leveraging on the •• Contrary to popular belief, cricket is content libraries that are being built for important but not the primary source of viewers in India. consumption Cricket is Important but not the Low Awareness of Indian OTT Apps Primary Source of Consumption Users are largely unaware about Indian OTT Contrary to popular belief, Indian content players who are available internationally. watching in international markets is not dom- Fewer than 20 percent of respondents inated by cricket (as shown in Exhibit 51). Our reported that they have heard of top Indian survey indicates that Bollywood content (both OTT apps (as shown in Exhibit 49). This music and movies) is the most preferred genre indicates that a strong content library solely of Indian content watched in international isn’t enough to tap into the international markets, with over 40 percent respondents in- markets. There is a need to fill this awareness dicating Bollywood music and movies as one gap to tap into this opportunity. of their preferred genres of Indian content.
There are several reasons why consumers Consumption of Indian Content is would prefer Indian content on apps, with Primarily through Global OTT the above few emerging as the top reasons. In Players most markets, watching Indian content on The advantage of high awareness of OTT apps OTT apps is cheaper than watching on TV. is demonstrated by the high proportion of The ability to watch on-the-go and to access global OTT players, as consumption of Indian latest content on demand, drives the demand
a ays a
otsta Inte nat ona oot Inte nat ona s one o t e a o e ee Inte nat ona n o a y ot on a y as an eo
Sources: oo e onsu e u ey ana ys s Q: o t e o o n Ind an ontent apps s tes a e you ea d o N o o o a ays a o
40 | Entertainment Goes Online—a $5 Billion opportunity
a ays a
a e e o ast n s pps su n upp one o t e a o e ou u e e s te e a y ot on es as an eo t e Ind an ontent apps otsta Int et e deo
Sources: oo e onsu e u ey ana ys s Q e e do you usua y at Ind an ente ta n ent ontent u t p e o e uest on N o o o a ays a o
a ays a
et and ot e spo ts o y ood us e ona an ua e o es o y ood o es Ind an o s t e Ind an ontent
Sources: oo e onsu e u ey ana ys s Q: o you at onsu e Ind an ontent I yes N o o o a ays a o
The Boston Consulting Group | 41 for consuming Indian content on OTT (as OTT subscription prices to the respective shown in Exhibit 52). countries and estimate a market size of over USD 1 billion by 2023 (as shown in Exhibit There is potentially a sizeable international 53), assuming average penetrations of opportunity for Indian OTT players which is respective Indian population in the key currently untapped. We have benchmarked diaspora countries.
a ays a
eape t an pa a es a ue o oney u e ata o o o es se a s e ona an one o t e a o e Exclusive content that I can’t find anywhere d ee e pe en e ty to at anyt e and on t e o ess to atest Ind an o es
Sources: oo e onsu e u ey ana ys s Q: at a e t e easons you t su s e to Ind an ontent apps at e t an u t p e o e uest on N o o o a ays a o
Player actions will determine how much of the potential is tapped
audi E alaysia o thers otal ar ets
o ulation
enetration assu ed y ar et
Sources: analysis in of External ffairs evenue esti ated ased on Indian dias ora current av rice in each ar et Notes: a s er assu ed i e audi alaysia E ource re ort u s of Indian layers in int l ar et as a of total Indian dias ora o ulation urrent rices assu ed to row in line with res ective ar ets
42 | Entertainment Goes Online—a $5 Billion opportunity REALISING THE OPPORTUNITY SIX-POINT AGENDA FOR THE INDUSTRY
or India and Indian players to realise •• There are a number of app combinations Fthis opportunity, all the key stakeholders installed on viewers devices with a signifi- will need to play their part. There is a cant longtail. significant agenda ahead for the industry. There are real implications for marketers of OTT apps (as shown in Exhibit 54): Six-Point Agenda for the Industry Breaking the clutter: a strong mar- •• Building broad awareness for platforms— keting challenge recall but also a differentiated position to The consumer of today, and even more so of communicate, “what does the platform tomorrow, is spoilt for choice. There are over stand for”, to break the clutter. 30 OTT options available and these are most- ly homogenous in the mind of the consumer. •• Marketing to target consumers—being The trap is to believe that consumers will focused and tight about who the platform find their way on their own. In other words, will appeal to and engaging the right there is a need to actively guide consumers to tools; identify consumers’ innate and different choices, their specific propositions latent demand. and the role that the platform can play in the consumer’s entertainment bouquet. •• Driving engagement when the consumer is on the platform to enable the consumer All our consumer research shows: to go beyond “hero content”—help discover the full power of the platform •• Low awareness about SVOD platforms. For instance, creating the right level of aware- •• Significant churn across platforms—50 ness requires being present across all import- percent of consumers’ churn within seven ant ATL and BTL options, especially the digi- days of installing an OTT app. tal options. For instance, Game of Thrones, an HBO show is exclusively available on Hotstar •• Undifferentiated subscription proposi- and Star Network in India. However, the cur- tions—churning consumers not convinced rent search for the show online suggests limit- of “value for money”. ed linkage to the original source of the con- tent (as shown in Exhibit 55). •• Consumers come to the platform for “hero” content; difficult to retain thereafter. To drive higher trials, it is imperative to create
The Boston Consulting Group | 43
E
universe
awareness • Enhance overall awareness for individual latfor s aided and unaided recall • reate a differentiated ositionin in the ar et
trial urchase • I rove conversion fro awareness to trial esta lish value ro osition in the ind of the tar et consu er • Induce trial with hero content and su erior ar etin
• reate en a e ent on the latfor eyond hero content durin first onth of the consu er usin the latfor and trial eriod • eal to the consu er with ti ht reco endations tar eted ricin and focused se ent of one ar etin
Sources onsu er esearch analysis N= a s considered for the analysis are a on ri e oichoi otstar re iu etflix and ee re iu
I E E E E I I E I E … HOWEVER, ASSOCIATION BECOMES HIGH E I I E E E I E I I E E I E ot has hi her nu er of search ueries in con unction with etflix than with ori inal source— otstar and star networ
a e of thrones etflix India a e of thrones etflix India a e of thrones otstar India a e of thrones otstar India
Sources oo le trend
44 | Entertainment Goes Online—a $5 Billion opportunity a frictionless experience for the consumers pop talent show asked users to vote for their fa- and get them across the line at the “right” vorite rappers via Qixiu and encouraged fans time. For instance, AltBalaji (similar to the to enter lucky draws held in Paopao, the online Chinese OTT players) allowed for the first set fan community of iQIYI, for tickets to the finals of its tent pole show—Bose / Test Case to be of the program or to meet their favorite rap- viewed for free to pull users in and capture pers at off-line gatherings. their interest; users then had to pay for access to continue watching Differentiated Content is King Similarly, it will be wise for companies to con- Content differentiation in this space is key. sider all potential options to ease the overall There are several competing platforms vying payment experience for the users. While for the same consumer eyeballs with so far credit cards, net banking and debit cards are minimal differentiation except “hero” and commonly available across different plat- sports content. In this environment, plat- forms, some of the more commonly used forms need to establish a distinct identity. methods such as mobile wallets, payment banks and UPI would also add more comfort There are several “niches” in India where to the overall payment process. there is consumer demand but lack of credi- ble options on content so far; these include: To drive retention, it is important for consum- ers to feel that there is still enough “value” in Music: Requirements from music platforms continuing with the platform post the con- in India indicate a desire to “view” along with sumption of the “hero” property. Hence, it is “listen”; demand for related Bollywood con- truly important to understand the consumer tent such as trailers etc. is also high. Current- and put forward the right set of next recom- ly, this need is met primarily by YouTube. mendations to drive users to the next right however, there could be space to build other show / property to keep them hooked to the offerings specifically addressing the needs of platform. Globally, Netflix has been one of Indian consumers in different music genres. the pioneers in building the content recom- mendation engine which has become a key With the likely entry of global streaming gi- competitive differentiator. ant Spotify in the near future, the space will possibly gather more steam in the future. To be successful, it is important for compa- Over the last year, with Jio Music and Saavn nies to think like a technology company first, combining and the launch of Amazon Music, leveraging not just the consumer data and be- the market has already started heating up havior astutely, but also marrying it with with all the players competing for consumers. great understanding of their own content and using meta-tags. Similarly for Video SVOD, the key would be driving user stickiness on the platform which Equally important is to communicate to the tends to be high with content availability, get- users on the value proposition of the plat- ting playlists created by users and driving the form, especially closer to the point-of-deci- social aspect of listening to music and shar- sion (which is, at the end of the monthly cy- ing with users. Such user-generated content, cle). Only when users feel that there is created by users, becomes one of the key fac- “enough” on the platform to continue for one tors behind users’ ability to cancel subscrip- more month, does the decision to continue tion at any time. become intuitive. Ad-supported music platforms are also likely One more aspect worth exploring would be to to continue with limited features like number provide intangible gains to a paid subscriber of skips allowed, ability to listen to music of- over other users—which either allows “brag- fline, etc. to get users to try the platform. ging rights” or creates a social aspect around the entire viewership experience. For instance, Kids: Our qualitative research indicates that iQiyi for their show, “The Rap of China”, a hip- there is a strong need for kids-specific content
The Boston Consulting Group | 45 and platforms. There are two types of distinct •• Regional content: there is a strong prefer- preferences: willingness to install apps that ence among consumers for regional offer rich content for kids; and investing in language and culturally specific content as individual devices, such as tablets, for kids to noted above in this report. This need for watch content. There could be a unique and regional content, however, goes beyond significant opportunity here. films and GEC and extends even to niches such as news, religious / spiritual content, ǟǟ Latent demand not fulfilled as of now. cookery, and comedy. While broadcast- Youtube is currently the preferred er-led OTTs are starting to make forays in mode of viewership. this space, there is also space for relevant focused regional plays in different parts of ǟǟ Kids as consumers show higher engage- the country. ment—higher than average watch times and international libraries used. •• Rural forays: as noted earlier, there is potential for rural households in India to ǟǟ It is possible to tap into this opportuni- skip the C&S step and progress directly to ty using not just the content but also OTT on their smartphones. Rural smart- the platform route e.g. user interface / phone penetration is already significantly controls / learning interface. higher than C&S and is growing. However, in order to build a business that is target- In case of kids’ content, there are multiple ed at rural India, there is a need to rethink factors which come into play, which will be the overall business model. important for players to address. Some of the aspects (non-exhaustive) to consider include: ǟǟ What kind of content does rural India need (storylines, characters, cultural •• Kids learning—becoming “smarter” by context) etc. to truly capture their using latest technology / smartphone / imagination and drive rural viewership? Internet and apps. ǟǟ Ad supported vs. subscription models: •• Variety and options—not just entertain- Build an approach to monetize the ment, but also associated learning. number of rural eyeballs which is quite challenging in today’s context •• Parental control—ability to control what / how much kids consume, to safeguard ǟǟ Pricing strategy: particularly to replace them from non-suitable content. the “C&S” connection
•• Perceived detrimental effects—impact on ǟǟ Marketing / branding / distribution: eyesight, kids being addicted to content and addressing the need to have clear disregarding outdoor / physical activity. positioning with the rural consumer, building brand and positioning as a This indicates the need for different business credible alternative to traditional TV models that extend beyond GEC and sports as a means to get deeper into India, expand the •• International business models: the Indian number of eyeballs available, and create spe- diaspora presents a significant market cific positioning to allow the platform to be opportunity, particularly in the top 5 one of the top three apps for the consumer. countries. However, the marketing chal- lenge is quite steep with overall low recall and awareness of Indian OTT players / Build a Geographically Focused apps. This will require a concerted effort strategy… from Rural to Regional through digital marketing, on-ground to International presence in top markets, leveraging social There are several imperatives emerging for media etc, to carefully build the business. OTT businesses to scale—and there are con- It is important to prioritise, pick priority scious choices to be made. markets and invest wisely.
46 | Entertainment Goes Online—a $5 Billion opportunity It is also critical for players to really pick their audiences to advertisers that enables focus geographies and languages to really higher monetization. make a dent and not be a also player. •• Customer acquisition and prioritizing different marketing channels. Consumer Data, Consumer Insight, Big Data and Analytics Considering the vast amount of data created It is a well-known fact that data is exploding. and tracked on OTT, it is imperative for play- The use of this data can create true competi- ers to use it to best understand their consum- tive differentiation for businesses that adapt ers—where they come from, what they watch, well. There is a need to think of consumer and use it to best predict their likely evolu- data and analytics around two important tion and interests going forward and service business dimensions: them in the most cost effective and efficient manner. •• Understanding consumers, deep consumer insight and segmentation. In the future, it won’t be too far-fetched to as- sume that content viewership and user be- •• Using analytics to drive monetization of havior on OTT platforms can be used to influ- OTT businesses. ence the overall content, even on the more traditional media. Considering the size of the Traditionally, consumer demographic infor- audience, the ability to understand the exact mation has driven segmentation. While this triggers at a much more granular level can re- captures basic consumer understanding, it ally drive overall content creation / optimiza- misses several important motivators that real- tion to the next level. ly drive purchase around demand spaces e.g. short break at work vs. family viewing in the evening), functional and emotional needs Establishing a New Measurement (e.g. fandom), and attitudes (e.g. price sensi- Currency for the OTT Industry tivity), etc. The exhibit below captures the There is a need for the OTT industry to difference between traditional consumer in- establish a “currency” that can help measure sight and segmentation vs. what is possible and understand the impact of advertising for today with new sources of consumer insight different types of advertisers and price in line (see Exhibit 56). with value created. This is essential for the long term growth of AVOD models in the There are several sources for monetizing country. A new currency can help represent deep consumer insight that can not only help value more holistically and capture the platforms differentiate their proposition to audience delivered (quantum, quality, consumers but also to partners such as segments) more sharply and holistically by: advertisers. •• Moving towards an industry common •• Product design: e.g. recommendation understanding e.g. BARC has established engine, reducing the time taken to arrive an industry standard understanding for at the content of choice, minimizing time T V. between videos / shows •• Triangulate across sources. •• Pricing: e.g. arriving at Price recommenda- tion matrix for different consumer •• Capture quality of audience. segments, differentiated pricing. Most importantly, a common currency will •• Content acquisition: e.g. acquisition spend bring a larger degree of acceptance among analytics (content green-lighting in line the overall marketing machine across the key with expected consumer revenue ad buyers and allow the overall potential of the OTT watchers to be unlocked. •• Targeted advertising: e.g. selling specific
The Boston Consulting Group | 47
HISTORICA , CONS MERS SEGMENTE SING HOWEVER THIS OESN T A RESS OTHER TRADITIONAL DEMOGRAPHIC MARKERS… RIVERS O CONS MER BEHAVIO R
A G
T T W , , ,
H T C E T T O O ,
I E
Source: BCG C E
Invest in the Right Tech, Create a critical mass. Such critical mass will allow User Friendly, Economically platforms to invest in improving the overall Viable Product consumer experience across the different de- Consumer demand from platforms is on the vices of choice (mobile, tablet, smart TV and rise. Consumers are influenced by different streaming media adapters-enabled TVs). types of online touchpoints (e.g. e-commerce, search) and define their expectations from those platforms basis those touchpoints. Plat- ONCLUSION: The online video opportu- forms that are not sharp in addressing con- Cnity is for real, and it is here and now. For sumer expectation on quality of technology players, who are successful in riding this wave and interface will struggle to scale up. to gain scale in eyeballs and area able to monetize this opportunity, it will result in sig- Our consumer research also indicates that nificant gains, adding directly to their busi- quality of touch points is one of the key crite- nesses and bottom line. However, the compe- ria by which consumers decide their OTT tition for space on consumers’ smartphones is platforms. going to be intense and only a few shall emerge victorious. Hence, it is important that every platform as- piring to gain scale reviews the technology and interface implications of having their own platform. Given the tech requirement, and the fact that typically consumers will have up to 3 OTT apps on their smartphones, there is a likelihood of consolidation. Every independent platform will require significant investment in technology and marketing / branding to really have the ability to build
48 | Entertainment Goes Online—a $5 Billion opportunity APPENDIX
Data Sources for Consumer Research
1. Consumer survey of ~5000 consumers from 24 cities:
Profiles of survey respondents, is shown in Exhibit 57 and 58 below
• N • M M • S G T T • T • E • T •
• T • • S T • A • S • D M C C • T D L • • D K G P • A • L • A K • O ICT R S • A M P H • L L • K • • L M I O • I M C C • L C • SNL MTNL M • L • A • L • R
Source: C N I C C M – T – T – S T T
The Boston Consulting Group | 49 SECTION HEADER TWO LINES SUBTITLE TWO LINES
Source:
2. Passive Data from Nielsen’s Smartphone Panel of 15000 Smartphones from Q2 ’16 to Q2 ’18.
Profiles of users on panel, is shown Exhibit 59 and 60 below
• • • • • • • • • • • •
• • • • • • • • • • •
Source
50 | Entertainment Goes Online—a $5 Billion opportunity
Source
3. In-depth qualitative research to form and validate hypothesis, is shown Exhibit 61 below:
Source
The Boston Consulting Group | 51 4. Consumer survey among Google users
Sample: International users—700 consumers across US, UK, Mayalsia and UAE
Music: ~700 consumers in India
Methodology:
Google Surveys offers two panels of respondents: (1) internet users reading content on a net- work of web publisher sites using Google Opinion Rewards for Publishers, and (2) smartphone users who have downloaded and signed up to use an app called Google Opinion Rewards. The publisher network uses inferred demographics, while the mobile app asks users to self-report their age, gender and zip code.
We evaluate the representativeness of a survey by balancing its sample demographics to match the demographics of the target population: adult (18 or older) internet users. We match based on three demographic dimensions: age, gender, and geography. In the US, we use esti- mates for the national internet population from the US Census Bureau’s 2015 Current Popula- tion Survey (CPS) Computer and Internet Use Supplement. In other countries, we rely on a combination of government data and internal Google data sources.
Google Surveys uses a two-step process to ensure each survey’s representativeness. First, we use stratified sampling to dynamically target respondents with the goal of matching the demo- graphics of the target Internet population. Next, we apply post-stratification weighting to more closely match those same demographics of the target internet population.
52 | Entertainment Goes Online—a $5 Billion opportunity FOR FURTHER READING
The Boston Consulting Group The Digital Revolution Is For more on Google surveys, publishes reports on related topics Disrupting the TV Industry please visit that may be of interest to senior An article by The Boston Consulting Google marketing platform: https:// executives. Recent examples Group, March 2016 marketingplatform.google.com/about/ include: resources/ The Future of Television: The Impact of OTT on Video Production Around the World An article by The Boston Consulting Group, September 2016
The New Indian: The Many Facets of a Changing Consumer An article by The Boston Consulting Group, March 2017
Digital Consumer Spending: A $100 Bn Opportunity A report by The Boston Consulting Group, February 2018
Television’s $30 Billion Battlefield An article by The Boston Consulting Group, August 2018
Convergence: The New Multiplier for India Media & Entertainment’s @100 Billion Vision An Report by The Boston Consulting Group, October 2016
Media & Entertainment: The Nucleus of India’s Creative Economy An Report by The Boston Consulting Group, December 2017
The Boston Consulting Group | 53 NOTE TO THE READER
About the Authors Nitin Chandalia Acknowledgments Kanchan Samtani is a Partner & Partner & Director The authors would like to thank Director in the Mumbai office of the BCG New Delhi Google India for partnership and Boston Consulting Group +91 124 459 7120 sharing insights which contributed [email protected] to making of this report Gaurav Jindal is a Principal in the Mumbai office of the Boston Vipin Gupta The authors also thank and Consulting Group Partner & Director acknowledge the support provided BCG New Delhi by Bharat Singhal, Akshay Cyril, For Further Contact +91 124 457 5607 Mallikarjun Vaddi and Tashmita If you would like to discuss the [email protected] Arora in preparing this report. A themes and content of this report, special thanks to Jasmin Pithawala please contact: Gaurav Jindal for managing the marketing Principal process and Jamshed Daruwalla, Kanchan Samtani BCG Mumbai Pradeep Hire, Abbasali Asmadi and Partner & Director +91 22 6749 7540 Pavithran NS for their contribution BCG Mumbai [email protected] towards design and production of +91 22 6749 7074 this report. [email protected] Mandeep Kohli Principal Karishma Bhalla BCG New Delhi Partner & Director +91 124 459 7435 BCG Mumbai [email protected] +91 22 6749 7135 [email protected]
Nimisha Jain Partner & Director BCG New Delhi +91 124 459 7210 [email protected]
Vikash Jain Partner & Director BCG New Delhi +91 124 459 7431 [email protected]
Sumit Sarawgi Partner & Director BCG New Delhi +91 124 459 7233 [email protected]
54 | Entertainment Goes Online—a $5 Billion opportunity
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