TV broadcasters vie for piece of the Rs 4,600 crore digital VoD market pie

Video is one of the fastest growing online ad formats with the highest CAGR (compound annual growth rate) of 56 per cent and amounted to Rs.330 crore in 2014, says the FICCI-KPMG report. This year it is expected to grow by around 30-40%

e4m by Collin Furtado
Updated: Nov 20, 2015 7:44 AM
TV broadcasters vie for piece of the Rs 4,600 crore digital VoD market pie

The market for OTT players providing video-on-demand (VoD) services is becoming one of the fastest growing markets today. The active OTT VoD subscribers in India are expected to grow to 15 million by 2015 from 12 million in 2014 and expected to further grow to 105 million by 2020, according to a MPA report. The digital advertising market size in India was around Rs.3,575 crore in 2014 and is expected to grow by 30 per cent during this fiscal according, Digital Advertising in India report by IAMAI and IMRB International. This would take it to around Rs. 4,600 in 2015.

Video, in fact, is one of the fastest growing online ad formats with the highest CAGR (compound annual growth rate) of 56 per cent and amounted to Rs. 330 crore in 2014, says the FICCI-KPMG report. The reason for this is that marketers are looking towards online VoD players that give higher engagement, visibility and adds to the brand recall value. This year it is expected to grow by around 30-40%. At this growth rate it video advertising is expected to reach Rs.500 crore by the end of 2015.

TV broadcasters in the VoD space

This is the reason why a lot of TV broadcasters as well as DTH players have entered the OTT VoD space. In previous articles on exchange4media we had seen a few TV broadcasters which had entered this space and were already looking at ways to monetise the content. ZEEL and Sony Pictures Network (SPN; erstwhile Multi Screen Media) were the first two in the game to create digital OTT platforms such as Ditto TV and SonyLiv. This year Star India had launched Hotstar. Viacom was the last to join in with the launch of their OTT VoD platform Voot. Similarly, DTH players such as TataSky and DishTV too have joined in the fray with the launch of TataSky mobile app and Dish TV’s DishFlix.

The players which have made an early entry into the OTT VoD space have seen tremendous growth this year. One of the leading OTT VoD player Ditto TV had seen its revenues grow to Rs.30 crore during last year and is expected to see a 100% growth this year to reach Rs.60 crore. However, unlike other broadcast players in this market which are largely skewed towards an ad based model, Ditto TV has generated a large majority of the revenue through subscription. Almost 95-96% of the revenue has been through subscription.

Speaking about the growth opportunities Uday Sodhi, EVP and Head – Digital Business, SPN said, “The digital ad market today is growing at about in the range of 30-40%. We believe that the market will expand significantly because of 2-3 reasons, one we believe that the smart phone penetration is going through the roof. If that no. is growing at 5-6 million on a month-on-month basis, so we are basically adding 60 odd million smart phones a year. That is a large chunk of people. Second I think there is a huge penetration or bandwidth penetration that is happening for 3G and 4G with Airtel launching, Jio will be launching, so will Vodafone, Idea, etc. I think this will open up the ability to consume video content significantly. The third thing is with online payment becoming easier and easier through a lot of payment options, telecom payment options, mobile wallets, etc. That ecosystem will help us over the next couple of years to significantly expand this business going forward”. SonyLiv had recently created its first web exclusive show #LoveBytes which had attracted brands such as Integriti and Caprese as their two main sponsors apart from other brands. They are currently operating on an ad based model but have plans to introduce a subscription model too down the line. “Currently we are building an advertising based business. Today whatever web series we are building are AVOD based. Yes at some point in time we will want to do subscription based stuff, but the current things that are in the pipeline are AVOD,” said Sodhi.

The ad rates currently in the market are around Rs.300-400 CPM (cost per thousand views). However from brands whose products are integrated or are title or associate sponsors or run their ads during the show the rates can go up by 3-4x higher.

Hotstar which is the VoD app launched by Star has also caught the eye of a lot of brands since its launch in February this year just before the ICC World Cup. While the app has been following an AVOD model, the network also has which had an subscriber model. It recently launched its own original web series ‘AIB on Hotstar’ and have taken some shows only on the VoD platform. The web series has attracted brands such as as the presenting sponsor, while Tata Motors and Idea are the powered by sponsors. Apart from them there are other brands which have associated with the show.

Voot which has just been launched has yet to get started. However, they won’t take long to catch up as Viacom brand MTV’s digital arm has been very successful in not only creating original digital content for a few years back but has also been successful in monetizing it. They have tied up with various brands such as Tata Nano, CEAT, Hero MotoCorp, etc. for their digital series.   

Original digital content key to monetization

Most of the TV broadcasters are looking towards original digital content production as the key to drive growth of their OTT VoD platforms. While catch-up TV will contribute a significant amount of revenue for their digital platform, it will be original digital content which is produced for the mobile medium specifically which will be the key revenue earner. With content being produced TV broadcaster will look for brand integrations apart from sponsorship as well as pre-roll ads. This will bring a significant chuck of the revenue for these platforms. Though a significant amount of costs are attached to original production these broadcasters also see an opportunity for them to demand higher rates than the market for their efforts. A reason why we are now see a lot of these broadcasters moving towards this way.

Subscription too is gaining ground. An example of the success of the subscription model can be found in Ditto TV. The digital video subscription market is estimated to reach around Rs.4,000 crore by 2020. A reason why many are looking to have a business model which will be a mix of both. “I think it will be a combination. Worldwide also we have seen that there is no one model which really works. Globally there are three or four ways which people are monetizing content on the net. One is the TVOD model which is followed by iTunes, Google Play store, etc. Then is the SVOD model and the third is the AVOD model. I think models will be a combination of these three,” says Sodhi.

While exclusive and time bound or live content such as sports or release of a new series or movie will be subscription driven, other content such as original digital content will be advertising driven.  

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