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After an exciting 2019, it may be a happy 2020 for Netflix, Hotstar and Amazon Prime

Devina Joshi
Netflix, Hotstar, Amazon Prime, OTT players, ALTBalaji, Zee5, Flipkart Video, video streaming industry, ShemarooMe, Tata Sky

The year 2019 has certainly been an interesting one for the video-streaming industry - not only marking the end of a decade, but also for transforming the face of entertainment. This has been the year of the unusual: Netflix altered its global strategy to launch its first-ever mobile-only viewing plan in India; of all companies, Flipkart forayed into the OTT space with its free in-app video service Flipkart Video; and there were unforeseen content tie-ups between local OTT players - the likes of ALTBalaji and Zee5.

The beginning of the year witnessed the usual telecom-OTT tie-ups, followed by even travel companies tapping OTT partnerships. February saw the launches of MX Player and ShemarooMe, two OTT offerings that haven't stopped partnering others in the OTT ecosystem since, including tie-ups with each other. MX Player, for example, currently hosts content from SonyLIV, Voot, ShemarooMe, SunNXT and Hungama Play, in addition to content from at least 10 linear TV channels. Clearly, with 35+ OTT apps in the country currently, a collaborative environment seems to be the name of the game.

Analysts say eventually, small content libraries like ALTBalaji could get bought over. "The 'rights shopping' (of standalone services) will be in play. Small platforms will get folded into larger platforms, and a shakeout could take place," says Paritosh Joshi, principal, Provocateur Advisory.

This year, the OTT ecosystem also expanded with DTH players plunging headlong into the space - Dish TV launched WATCHO in April, while Tata Sky launched Binge to bring premium digital content to its viewers.

This included tie-ups with players like Hotstar, Sun NXT, Eros NOW, Hungama Play and Zee5. What is clear from this is that value-added offerings are the need of the hour for DTH players to chug along and keep up with the times.
Furthermore, Apple TV+ marked its global debut in the OTT space in November, with a plan to offer the service at Rs 99 per month in India, after an initial year-long free offer for new Apple device owners. It will be interesting to see if Apple TV+ finally launches India-specific content anytime soon, considering the ripe environment for local production of Apple devices in the country now, which could help lock-in consumers.

Disney+ was also launched last month with its library of Disney, Pixar, Marvel, Star Wars and National Geographic titles, though its plans to expand beyond the West could take another year or two. In India, Disney+ is not likely to be a separate offering; instead, its local partner Hotstar will carry its content, according to sources. Then there's also HBO Max, another OTT offering slated to launch in select markets in May 2020.

With content studios launching their own OTT offerings and pulling out from distribution platforms like Netflix, an emphasis on compelling originals has never been more pronounced for the likes of the latter. "The past decade was dominated by Netflix globally. It became synonymous with the category," says Tony Gunnarsson, principal analyst at market research firm Ovum. Currently, almost half of the households in the US have Netflix, while in Europe one-fourth households do. Its third-biggest market is Latin America, with around 10% penetration. "But for the next decade, the prospects for Netflix may not be as bright, considering the launch of other next-gen services," Gunnarsson says, adding: "I don't see Netflix achieving more than 15-16% household penetration outside of North America and western Europe anytime soon."

With Netflix losing crucial titles from its portfolio as a result of competition, its gamble on originals could be its panacea. However, some analysts believe that if this strategy doesn't pay off, the company could become a potential acquisition target over the next two years.

Currently, there are 46.15 million subscriptions for streaming premium services in India, slated to touch 92.32 million by 2024, as per Ovum. Among the top five this year are Hotstar Premium (15 million subscribers), Amazon Prime Video (6.75 million), Eros Now (6.27 million), Zee5 (4.64 million) and ALTBalaji (3.7 million). Clearly, local players still rule the roost here, but this could change over the next two years with heavy investments into local originals and high-quality production by international biggies.

Compare this subscription ecosystem with figures for the relatively ad-driven model of YouTube in India: currently at 271.9 million viewers, YouTube will touch 399.8 million viewers in India by 2023 (as per eMarketer). But as YouTube increasingly and aggressively peddles its premium, subscription-driven video and music offerings, will this dynamic change?

"If you look closely, content is beginning to repeat across platforms. Google itself has multiple avenues for movies, like Google Play or YouTube, both of which enable you to rent or buy titles," notes Joshi of Provocateur Advisory. The model being followed here is TVOD (transactional video on demand), which is akin to a pay per view model.
So which revenue model is likely to help sustain the OTT industry-SVOD, AVOD or TVOD? Apple TV+, for instance, is a curious mix of SVOD (`99 per year) and TVOD (some of its titles can be bought or rented for an additional amount). Analysts predict hybrid models could be sustainable in the long run.

"SVOD involves capital-intensive investment in technology, original content and distribution, and needs huge scale. AVOD brings in a lot of revenue and suits players who are just starting out, as barriers to entry are lower," Gunnarsson says. "TVOD will work only if the titles you are offering are more recent or sought-after than other players," he adds.

One would think that with the current economic slowdown and the rise is data tariffs by telecom operators, the OTT industry is likely to be adversely affected in 2020, as a majority of consumption happens over mobile devices in India. "Data charges going up will have a small, short-term impact," says Joshi. "Let's not forget, prior to data pricing being dirt-cheap, we were buffering YouTube all the time and would make offline downloads over Wi-Fi."

In fact, he says, entertainment is probably one of the rare industries which is "recession-proof" in a sense, and only strengthens when people are anxious. "The time spent on digital viewing will only go up, even as subscription revenues may be stagnant or people rationalise the number of apps they use," Joshi says.