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How India is charming Netflix, Disney, and Amazon

Indian consumers have begun to show stickiness to video-on-demand platforms with ever-increasing engagement.

Photo by Jens Kreuter on Unsplash

There is a unique reason why India has become a magnet for global media giants like Netflix, Walt Disney, and Amazon.

A new report by research firm Boston Consulting Group (BCG) and industry body Confederation of Indian Industry (CII) reveals that India is going through a “multi-modal” media growth. Unlike other parts of the world where digital media is growing at the cost of traditional media, in India, consumption is rising across all the media formats—print, radio, television, and digital.

While traditional media is growing at a steady pace, the report said, digital media is driving overall growth with a 16% CAGR over the last couple of years. Within digital, video consumption per capita has more than doubled over the past two years from 11 minutes per day to 24 minutes per day in the world’s second-most populous country. The video consumption rockets up to 2.1 hours per day on an average, if we consider only those users who have access to digital media like computers and smartphones. In 2017, such users watched video for 1.4 hours per day.

BCG believes, India has now surpassed a trillion unique interactions with customers across these media channels.

“The demand side story is led by India’s favorable demographics, the surge in smartphone adoption, coupled with ubiquitous low-cost mobile internet,” the report states.

True enough, India has all the right conditions: over 450 million millennials; with half a billion users, second-largest base of smartphones in the world; dramatically low data cost thanks to the disruption brought on by Indian telecom service provider Reliance Jio; and highest per capita consumption of data at 9.8 gigabyte (GB) per month.

“On the supply side, the exponential growth of players investing heavily in driving… relevant content, affordable pricing, easy payment options, customized formats, among others has not only driven the growth but set the benchmark for a truly enriching experience,” the report said.

For instance, ever since their entry into the India market, Disney-owned Hotstar and Amazon Prime have focused on regional content available at affordable prices. After operating for three years in India, Netflix has also learnt its lesson. Instead of running a standard subscription plan that was more or less at par with its global pricing, it tweaked its pricing in July this year.

Seeing the increase in video consumption on smartphones, Netflix came up with a mobile-only plan for Indian viewers priced at INR 199 (USD 2.80) a month, a first such plan anywhere in the world. While the mobile-only price was also a way to take on its fast-growing rivals, which on an average charge a little over USD 1 per month, it’s still expensive than the monthly fee of its rivals.

The report states that the top four over-the-top players in India including Netflix, Amazon, and Hotstar have together invested over INR 2,000 crores or USD 278.75 million over the last year. The report didn’t mention the fourth OTT player.

These investments now seem to be starting to pay off.

The Lipstick effect 

While Indian consumer internet companies have struggled to retain paid users once freebies such as discounts, cash-backs, and free-deliveries dry up, the BCG-CII report has found that consumers are willing to pay for entertainment, especially TV, DTH connections, and paid video apps. It is to be noted that almost all OTT players lure users by offering one-month free or a few select shows for free, hoping once they get hooked on the content they will become full-time subscribers.

While India is going through an economic slow down and GDP is seeing a fall that was last seen two decades ago, Indians are not cutting their TV chords yet, so to speak.

Given the high stickiness of users and the tendency to pay, the report said, the spend on media is expected to follow the ‘lipstick effect’—which refers to consumers spending on small indulgences during recession, economic downturns, or when they personally have little cash to spend on expensive products.

Subscription video-on-demand (SVOD) adoption has been driving user base much “wider than the traditional 3M’s (metro, male & millennials),” the report said, adding video viewing seems to be “largely economy agnostic, and consumers are expected to increase spending in the near future.”

According to BCG, Indian consumers have begun to show stickiness to video-on-demand platforms with ever-increasing engagement levels both in terms of the number of sessions and time per session.

Over 2018, there has been a 10 to 15% increase in number of sessions, while the average time per session has gone up by 15 to 25%.

“The high levels of engagement are starting to address the issue of monetization which traditionally has been the proverbial elephant in the room,” said the report. “Consumers are increasingly looking to move beyond trials but the funnel flow is still small compared to the large scale investments being made by players to both acquire and retain consumers.”

The Indian SVOD market is expected to touch USD 1.5 billion by 2023 from USD 0.1 billion in 2018, the report said.