This Article is written by Saumya Singh Thakur (a law student at NMIMS School of Law, Mumbai)
Table of Contents
The COVID-19 pandemic is unique in that it has not only led to considerable loss of human life but also widespread economic hardship through the concurrent supply (input constraints), demand (spending patterns, consumer confidence) and market (financial conditions impacting wealth) shocks.
India’s real GDP growth had already decelerated to its lowest in over six years at 4.7% in Q3FY20. The COVID-19 pandemic, resultant lockdown and social distancing measures can only be expected to worsen the prospects across manufacturing, services and agriculture. Along with lower consumption levels and higher unemployment, the Indian economy is likely to face a particularly challenging time in the months of lockdown.
The Media and Entertainment (M&E) sector in India was estimated at INR 1,631 billion in FY19 and grew at a compounded annual growth rate of 11.5% over five year period FY15-FY 19. This was against an overall rate of growth in the country’s GDP at 7.2% during the same time.
Typically, media consumption has tended to be income inelastic. However, the current environment is unprecedented and could result in a dip in media consumption in the near term and importantly, realignment in consumption models. During the lockdown, however, certain segments of M&E are seeing consumption growth, particularly in TV, gaming, digital and OTT. On the other hand, outdoor consumption models – films, events, theme parks et cetera are witnessing a dramatic fall with social distancing norms in place. Further, most segments (except news related businesses) are unable to offer new content with production stalling across formats. Many segments of M&E also depend on contract employees/ freelance agents and hence the impact of the crisis on livelihoods in the sector is also considerable.
Monetisation in the M&E sector is predominantly reliant on advertising, which has seen a major contraction. Overall ad-spend is determined by the performance of sectors such as FMCG, e-commerce, automotive, financial services, real estate etc., all of which currently face their own challenges and could therefore take time to recover.
TV: GLUED TO THE TELLY BUT WHERE’S THE MONEY?
- Overall TV viewing has increased but absence of fresh content.
- News channels are popular as viewers follow COVID-19 updates in real time.
- Monetisation has dropped substantially with advertisers scaling back on spends.
- Sports could emerge as the big draw when recovery begins, especially if IPL dates were announced.
PRINT: NEW LEASE OF LIFE
- Monetisation a serious challenge as advertisers scale back expenditures.
- Higher credibility in the face of proliferation of fake news on social media.
- Circulation pick up in near term ones restrictions are lifted also resulting in improved ad monetisation.
- Digital presence now more critical and could translate into greater monetisation opportunities.
FILMS: DISASTER AT THE BOX OFFICE
- Footfalls and therefore revenues have dried up with cinema hall closures.
- Rental cost savings anticipated due to invoking of force majeure clause.
- Recovery process maybe different across demographics based on specific COVID-19 experiences and perceived risk from social gathering.
- Medium-term release pipelines may be impacted due to crowding of projects and restart of on old projects.
OTT: SILVER LINING
- Secular rise in OTT consumption in duration, and across demographics and devices.
- Content pipeline has dried up. OTT players with a large, legacy library have an advantage.
- Ad spends currently down but greater digital allocations by brands likely post recovery.
- OTT players offering extended free periods to drive subscription pick up through habit formation.
ANIMATION: BACK TO THE DRAWING BOARD
- Lockdown has affected content creation as remote working poses infrastructural challenges.
- Animation and VFX work more long term so demand could hold up despite crisis.
- TV and digital projects would increase while film projects have taken a bigger hit.
- Segment has high fixed and capital costs so cash flow is likely to be an issue.
ONLINE GAMING: A DREAM RUN
- Noticeable increase in time spent since mid-March.
- Monetisation gap due to lowering of ad spends.
- Paid models could see growth as online gaming gets more entrenched into overall time spent on M&E.
- Fantasy sports and E-sports may be adversely impacted with a stalling of sporting activity, as well as potential aversion to social gatherings in certain demographics.
RADIO: TUNING IN
- Radio jockeys operating from home so content continues to be refreshed.
- Local and topical content popular as people look to follow COVID-19 news relevant to their specific area.
- Overall decline in advertising revenues, though some branding has been converted into CSR.
- Drop in transit audience listeners as people are working from home.
EVENTS: LIGHTS OUT
- Multiple events cancelled including IPL, IIFA 2020, India Gaming Expo, FDCI Fashion Week etc.
- Industry’s losses estimated at around INR 30 billion by the Event and Entertainment Management Association (EEMA).
- Earlier recovery more likely in B2B events before B2C as people continue to remain wary of crowded places.
- Given dominance of small players, the segment could come under severe cash flow pressures.
HISTORY OF OTT MARKET IN INDIA
BIGFlix, created by Reliance Entertainment in 2008, was India’s first OTT video portal. Then, in 2010, Digivive developed nexGTv, the first OTT video platform that could be accessed through mobile phone and provided both live and on-demand video. In the years 2013 and 2014, Next GTv was the first OTT video platform to live stream the IPL. When Ditto TV by Zee and Sony Liv was introduced in 2013, people began to pay attention to the Indian OTT sector. Hotstar’s launch in 2015 boosted the number of OTT viewers in India significantly. With 350 million downloads as of 2018, Hotstar is the most popular OTT application.
However, the arrival of American OTT giants such as Netflix and Amazon in India in 2016, with a large selection of movies and original shows, was a watershed moment for the Indian OTT market. It all combined to transform Indians’ tastes and preferences for the types of material they watch on OTT platforms, particularly among the youth.
While 55 per cent of Indians prefer to view interesting content on OTT Video Platforms, 41% prefer to watch DTH. OTT will follow the way of mobile, but brands and marketers will not be able to eliminate DTH. DTH is currently operating at a rate of more than 40%, and there is still a long way to go to connect with the rest of India, creating a market potential for firms.
“We expect OTT to gain market share in the future, but DTH will continue to be relevant”, Mr Arun Gupta, CEO and Founder of MoMAGIC Technologies, stated. From 2018 to 2023, the Indian OTT market is predicted to rise tenfold, from $500 million to $5 billion (BCG report, 2018). India is the world’s fastest expanding entertainment and media market and this trend is projected to continue.
CORONAVIRUS AND OTT: WHAT’S THE CURRENT SITUATION?
During the early stages of the outbreak, there was a great deal of ambiguity about when things would return to normal. Consumers were anticipated to cut back on discretionary spending and save for rainy days ahead due to the impact of a slowing economy and fears of an approaching recession.
The suspension of major sports leagues around the world was yet another major setback for these OTT platforms, as sports commercials made for a considerable portion of their earnings. Sports subscriptions, in addition to advertising dollars, were a big draw for sports lovers. Most major leagues, however, have returned in October, much to the relief of both sports fans and the OTT service providers.
Consumer spending is also shifting in favour of streaming services. According to a survey conducted by app distribution service MoMagic in July, three out of four Indian consumers would choose to watch a movie on various over-the-top (OTT) platforms at social distancing periods, compared to just one out of four who would prefer to travel to a cinema hall. Businesses are attempting to assess the total impact and determine how to convert prospects into profits and market share.
The impact of the current coronavirus outbreak on the OTT business was recently discussed in a comprehensive research issued by Research Dive. A striking figure is that, although the compound annual growth rate (CAGR) for the OTT market was approximately 16 percent before the pandemic, the CAGR post-pandemic is predicted to be over 19 percent. By 2026, this acceleration in the growth machine would have propelled the business to a staggering $438.5 billion market. Prior to the pandemic, the same growth was forecast to be just under $400 billion by 2026. As a result, Covid19 has unquestionably had a beneficial impact on the OTT business. Stay-at-home consumers have been watching more streaming videos than ever before, resulting in increased traffic.
The demand for OTT services was already high, but with the outbreak of the coronavirus, people have stopped coming to malls and movie theatres, and OTT platforms have stepped in to fill the hole by releasing new movies and TV shows. Initially, there were concerns, as many productions had stagnated due to pandemic-induced lockdowns in practically all major countries, while scheduled releases had been delayed. The shows, however, have begun filming now that constraints have been relaxed. While there is still apprehension about travelling to malls and movie theatres, production companies are increasingly turning to OTT channels.
Simultaneously, viewership and average time logged in have increased. According to OpenX, the average OTT user watches more than 2 hours of content each day, and millennials and GenZers are more prone to binge-watch content (2 times more) than older baby boomers, making them a lucrative audience for OTT providers.
The growth and expansion of this market is projected to be fueled by trends such as personalised content distribution and personalisation that encourages user interaction. Major players are innovating to provide users with a complete package. Furthermore, technologies such as Virtual Reality and Augmented Reality provide users with a better user experience when consuming information or playing online games. Users have been spoiled to expect a TV-like, near-flawless experience while watching streaming video, with over 300 streaming service providers to select from on average.
During the lockdown, more people are subscribing to OTT platforms. Furthermore, several countries’ governments are pushing investments in supporting infrastructure. The OTT platform is considered as a way to distribute educational content, explain government policies, and help local service providers and product enterprises engage with their customers.
- ‘New Media as a Change Agent of Indian Television and Cinema: A Study of Over-the-Top Platforms,’ by P Singh. A study was undertaken in June 2019 to see how Indian television and cinema are changing as a result of new online platforms and how the youth are using these new digital platforms to watch video content. It was discovered that young people like to watch OTT web series and movies. The average viewer spends 2 hours watching OTT, and the most popular time to watch OTT is at night. Young people prefer OTT to television because of the service, the personal medium, and the availability of international material.
- In August 2019, Brett Hutchins wrote in Over-the-Top Sport that live streaming services will alter the market for coverage rights and the expansion of media sport portals. OTT Live Sports Platforms like Tensent, Amazon Prime Video, and DAZN are defining new standards for how media sport is accessible and curated, signalling a major shift in the worldwide market for sport broadcast rights and the media systems that distribute live content.
- Dr. Sabyasachi Dasgupta and Dr. Priya Grover’s study, titled “UNDERSTANDING ADOPTION FACTORS OFOVER-THE-TOP VIDEO SERVICES AMONG MILLENNIAL CONSUMERS,” also confirms that Indian audiences have shifted to OTT content and are willing to pay for easy and unlimited access to content without a place or time limit.
- Ritu Bhavsar in her research paper entitled “The Burgeoning Digital Media Consumption: A Challenge for TraditionalTelevision and Advertising Industries – An Analysis”states digital media has become an essential part of people’s daily lives, and it is a popular medium for acquiring and transmitting information, socialising, entertainment, and marketing. Consumer preferences and attitudes are changing as a result of increased content consumption via digital media, and this development may be attributed to improved internet connectivity, advanced digital devices, competitive data prices in India, and the accessible, on-the-go nature of internet media.
- Netflix, Hotstar, and Jio are the most popular among Indian young, according to a study by ParamveerSingh. The youth are more likely to take advantage of free trials offered on these platforms, are nocturnal viewers, and prefer web series to cinema. Over-the-top applications are transforming media consumption patterns in India, according to the respondents.
- Streaming TV is a multisited, quasi-iterative, and rapidly developing marketplace, in which inheritant pattern prevail alongside and often in rivalry with new styles of production, transmission, and consumption – Sanson K., ‘Hulu, streaming, and the contemporary television ecosystem’ (2019).
- The proliferation of internet-enabled digital devices capable of supporting digitised information has led to an increase in the consumption of digital content internationally, according to a Deloitte report titled “Digital Media: Rise of on-demand Content.” This tendency may be seen in India on a variety of channels, including audio, video, news, and music.
- PwC India’s research, which predicted a big opportunity for OTT platforms in India, made similar observations. However, the paper claims that content pricing can stifle growth and recommends a new policy to help India’s OTT business thrive.
- Another study on Netflix by Sidneyeve Matrix found that users, particularly young people, are becoming active curators of content rather than passive consumers of “whatever creators give them.” The demand to share, remain connected, and discuss content on social media platforms is supporting this paradigm shift in consumers.
The popularity of OTT is on the rise as a result of increasing smartphone penetration, competitive internet data plans offered by Indian telecom service providers, the abundance and quality of content on these platforms, and global media industry dynamics that have a significant impact on the economic and policy matters of OTT service providers, according to the literature review.
While traditional media could face some challenges in the near to medium term, digital medium businesses have fared relatively better, albeit only on the consumption side. There is likely to be a long-term – upward – shift in the integration of digital technologies into our everyday lives, and media and entertainment will be an immediate beneficiary.
The study finds that there is a discernible rise in the prevalence of OTT as a preferred medium, a habit solidified by the formerly unheard of lockdown due to the highly virulent COVID-19 pandemic. Though corona and lockdown restrictions have negative impact on the M&E sector but OTT platforms subscriptions seems to rise immensely. Viewing content on any medium is a matter of behaviour which converts into a habit over a period of time. Indians for long have yearned for diversity of content. A common family television enabled with limited channels restricted the imagination of young India. This imagination was tapped and explored by OTT players optimally during COVID 19 and the flexibility of accessing a range of content on personal devices including smartphones and tablets gave young India the freedom to watch what they desired. However, OTT players have just scratched the surface of the iceberg; there is enormous scope to delve further into the regional Indian market in the future. This medium has carved out a new niche for itself in urban India, with just 40 OTT channels and minimal regional content. COVID 19 has aided in the widespread use of the medium in urban areas, where people have more disposable income than in semi-urban or rural India.
OTTs are being seen as an aspirational platform for content consumption, and with all the buzz in the right circles, they’re quickly transforming those on the fence through age ranges and demographic regions. COVID 19 introduced with it certain elements that have now become the modern standard, such as operating from home, which has seemed to bring scheduling versatility to many.
- ETBrandEquity.com. 2020. Indian OTT Market To Reach $5 Billion In Size By 2023: Report – ET Brandequity.
- Brett Hutchins (2019, August 20) ‘Over-the-top sport: live streaming services, changing coverage rights markets and the growth of media sport portals’ Media, Culture and Society, Volume: 41 issue: 7, page(s): 975-994
- Deloitte. (n.d.). Digital Media: Rise of On-demand Content. Retrieved April 15, 2020, from https://www2.deloitte.com/content/dam/Deloitte/in/Documents/technology-media- telecommunications/in-tmt-rise-of-on-demand-content.pdf
- Singh, Paramveer. (2019). New Media as a Change Agent of Indian Television and Cinema: A study of over the top Platforms. 9. 131-137. 10.31620/JCCC.06.19/18.
Potential impact of COVID-19 on the Indian economy, KPMG in India, April 2020
Quarterly estimates of GDP for the third quarter (Q3) of 2019-2020, Ministry of Statistics and Programme Implementation (MoSPI) accessed on 06 April 2020
India’s Digital Future: Mass of Niches, KPMG in India 2019
MoMagic Survey 2019 and Gaurav, 2019
August 2019 MoMagic Survey