As per a Cisco study, video content is estimated to account for 69 per cent of all consumer internet traffic by 2017. In fact, quite a few recent reports have pegged video to be the most widely consumed content formats online in the coming years.
The audio-visual form has always been the preferred medium for advertisers, and combined this with the reach of the digital medium, it is no wonder that content creators and advertisers are busy gearing up for an era where the audience will consume more and more video content online rather than through traditional mediums. Last year, for the first time ever, a joint IAB and PricewaterhouseCoopers (PWC) found that digital ad spends had overtaken ad spends on broadcast TV. Though TV advertising still accounts for a sizeable chunk of global ad revenues, this is an indication of the future (though some still hold that TV ad spends are not likely to be eclipsed by digital any time soon).
In the US and other developed nations, we are already seen operators such as Netflix and other OTT (Over-The-Top) and streaming service providers getting increasingly popular. Content creators and broadcasters such as HBO also have their own digital on-demand services. Taking a cue from their Western counterparts, even Indian broadcasters have recently increased their efforts in providing quality digital video content to their audiences. Star Sports has seen success by providing live streaming of sporting events. Other players such as Sony Entertainment and MTV have also started providing their content online. Then there are OTT operators such as Spuul and VuClip, which target the Indian Diaspora with content such as Bollywood movies and serials. The question, though, is how viable is the online video content space from a business perspective?
Smita Jha, Leader, (Entertainment & Media) PwC India, agreed that the market is not really big in India right now. However, she sees it as more of an opportunity for Indian broadcasters to test the waters and be ready for when the market becomes mature enough for online video content. “Online video content has seen significant growth in the West, and one thing we have learnt is that it is possible to anticipate what will happen in India by looking at trends in the West. There might be a difference of a few years, but consumer preference is definitely moving online,” she opined.
This is a sentiment that seems to be shared by even broadcasters. Nitesh Kripalani, Executive Vice-President–New Media, Business Development and Digital/Syndication at Sony Entertainment Network, whose prime digital property is Sony LIV, agrees that the market for online videos is not mature enough in India. When asked about how ad rates for online content differ from TV content, Kripalani said, “If you look at the US and the UK, ad rates (for online video content) are close to TV ad rates. However, in India the gap is too large. We still operate on above average ad rates otherwise you will never be able to offer quality content.” Ekalavya Bhattacharya, Head of Digital, MTV also said that the focus is currently on growth and providing quality content rather than earning revenues, though he admitted that MTV does not compromise on ad rates. “We charge a premium ad rate to our sponsors because we create a holistic property for them,” he said.
The two other options available are a subscription-based model or an on-demand model, which is usually more popular with OTT operators. However, with the average Indian consumer shying away from paying for consuming content online, the subscription model has its own hurdles. “We would love to do it, but I don’t think anybody has had any real success with the subscription model, because the end consumer does not want to pay. I don’t think the average Indian consumer is ready to pay. It’s not a mature market,” said Kripalani. But this was exactly the sentiment in the US, where subscription hardly existed till a few years back. “By 2011, with the economic problems, advertising money was not coming in, but subscription money had started coming in. They also started with the same journey that we expect in India. Subscription will happen if you have good content,” opined Jha.
Also, with online content, there a number of different options such as click-throughs, banner ads, etc., available to advertisers, apart from the usual ad spots available on TV. For example, MTV does branded content with sponsors, which gives more value and also justifies the premium rate being charged by the broadcaster.
Meanwhile, the other side of the ecosystem, namely the OTT operators, has become an integral part of the content syndication. Prakash Ramchandani, CEO, Spuul.com India said that content owners should look at OTT as they would the DVD market. Spuul.com’s main focus is on early releases of Bollywood films, though it also has content from Indian TV shows. However, as Ramchandani puts it, “Our TV shows are not meant for binge watching. Programming on TV is not meant for online currently.” He further said that advertisers are ready to pay more while audiences are also not averse to paying for content as long as they get content that appeals to them.
Similar sentiments were echoed by Meera Chopra, Vice President & Global Head of Advertising Sales, VuClip. “When we started advertising two years back, it was still nascent, but currently we have more than 150 advertisers, including Honda, Nokia, Seagrams, etc.,” she informed. When asked about how significant subscription revenue is for an OTT operator, Chopra said that it will eventually grow, but the important thing right now is to increase consumption and then getting people to pay for it.
With the mobile ecosystem, which is the strongest driver of digital consumption, looking strong and growing swiftly in India, there seems to be no reason to believe that India will follow in the footsteps of the more developed nations in becoming a major consumer of online video content. Will this lead to cannibalisation of TV ad revenue? TV is the most expensive medium available to advertisers, and with issues like the ad cap and inventory crunch, it is not without its hurdles. We already mentioned how digital ad revenue overtook TV revenue last year, something Jha alludes to as “a clear indication of changing consumer preferences”. When asked how the growth of online video content will impact TV revenues, Jha admitted that a bit of cannibalisation has been witnessed in the West. “The ideal model would be a supplementary model; a mixture of both, which would allow advertisers to reach a wider demographic and age group,” she added.
However, OTT players remain adamant that cannibalisation is the furthest thing from their minds. Both Ramchandani and Chopra dismissed concerns that TV revenues will be diverted online. At the end of the day, whether cannibalisation occurs or not, it is another medium, with its own set of advantages available for advertisers. Like broadcasters and others, even the advertisers should start preparing themselves for the day when consuming content online is the norm rather than an exception.