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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 <Devices Services > Youtube brings 2005 YouTube streaming Apr-05 mainstream 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.