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Indian video streaming companies battle global giants for foothold in smaller cities | Tales from India’s Towns

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A report by IAMAI and Nielsen said rural India had 227 million active internet users, while urban India accounted for 205 million users.

It has been a week since 18-year-old Nitesh Kumar, a civil service aspirant from a tier-2 North Indian city with a population slightly over 2 million, got hooked on Amazon’s new offering—miniTV, a video streaming service that the company launched in mid-May.

Before miniTV became part of Kumar’s entertainment rotation, he was piggybacking on his brother’s Prime Video account to watch his favorite TV shows and films, as he does not want to pay for his own subscription. But now, he doesn’t have to, as Amazon’s new service is free.

“A friend told me about miniTV the day it showed up on the Amazon app. This is much better than Prime, as I can watch it on my phone without having to download another app for it, and the best part is it’s free,” Kumar told KrASIA.

Since people in smaller cities have a lower per capita income, it is not easy for private companies to rake in revenue from these markets. Being cognizant of this fact, Amazon floated an ad-based video streaming platform to ensure netizens from lower-tier cities can get a peek of what it has to offer without having to pay for a subscription.

In the past four years, the battleground for video streaming services has slowly been shifting from the United States to India, as the country’s OTT market, according to a report by Boston Consulting Group, is the fourth largest in the world and is expected to be a USD 5 billion business by 2023. This is what local and global companies such as ZEE5, MX Player, Voot, SonyLiv, Netflix, Disney+Hotstar, and Amazon Prime Video are after.

Beyond the metro cities

In the last four years, global streaming giants have largely targeted low-hanging fruit—English speaking users in metropolitan cities who have higher disposable income. However, in the last year, OTT companies—both Indian and foreign—have tried to tap the burgeoning internet population of India’s semi-urban and rural areas. This is where new customers are located, even though the household income in these areas are lower.

Last year, there were far more internet users in rural areas than in urban parts of the country. A report by the Internet & Mobile Association of India (IAMAI) and Nielsen said rural India had 227 million active internet users, while urban India accounted for 205 million users.

“On the back of smartphone penetration and affordable data, OTT today is no longer a metro phenomenon, since it has become the primary source of entertainment for consumers across the country,” Manish Kalra, chief business officer at ZEE5 India, told KrASIA.

As online streaming for films and TV shows becomes more prevalent in semi-urban Indian cities, OTT companies have realized they must have a stronger user base in this market to truly capitalize on the country’s internet users. Mihir Shah, vice president of research firm Media Partners Asia, said if the OTT platforms only cater to major cities, they will reach 10–15 million people. “The actual growth is going to come from smaller cities that are set to have the next 300–500 million internet users,” Shah told KrASIA.

Indian video streaming companies battle global giants for foothold in smaller cities | Tales from India’s Towns
Netflix viewers in India watch more shows and movies on their mobiles than viewers anywhere else in the world. Photo by Sayan Ghosh on Unsplash.

Gourav Rakshit, chief operating officer of Viacom18 Digital Ventures, which owns Voot, said the growth rate in smaller cities is much higher than in metropolitan cities. But, he said, since the base is much larger, it will take longer for the company to reach the depth of this market.

In their effort to woo new audiences from smaller cities, Amazon, Netflix, and Disney+Hotstar have been releasing movies and TV shows that are more relevant and can better connect with viewers outside of urban hubs. These include stories portraying the peculiar life of smaller cities that are either fictionalized versions of real events like Netflix’s Jamtara, a crime story set in a North Indian village, or Prime Video’s drama Mirzapur, a story of how two brothers living in a city known for its carpet production become entangled with crime lords.

Disney+Hotstar, on the other hand, is serving up more content in local languages in addition to Hindi, which is largely spoken in the northern part of India. Similarly, Prime Video releases many of its original shows in other languages for mass market outreach.

“Dialects and languages change every 10 km in India. By releasing its originals in multiple languages, as well as producing content in local languages like Tamil, Telugu, and Marathi, Amazon is being very versatile in its effort to make its mark in non-metro markets,” Shah said.

According to him, Netflix’s content is still in the premium bracket. “Their content is largely skewed towards English- and Hindi-speaking audiences.”

A report by Just Watch, an online video streaming guide, said Disney+Hotstar had the largest market share in subscription-led video streaming space last year. It said the top three streaming services in India made up 56% of the market. Disney+Hotstar remained the market leader over Prime Video and Netflix by a 2% and 1% margin, respectively.

While these global players compete to vie for the lion’s share of the video streaming market, they are also facing stiff competition from Indian OTT companies such as Sony Liv, ZEE5, and Voot. The Just Watch report stated that ZEE5 was on the fourth spot, claiming 9% of the subscription-led video streaming market share.

People in the industry said that having content in local languages will be one of the major factors to determine which platform will have a stronger foothold in regional markets.

“Since inception, we have produced more than 120 original shows in 12 languages. While we have launched regional original content in five languages, for the rest [of the country], we have a series of dubbed content available on the platform,” Kalra of ZEE5 said.

This year, the company aims to release over 90 shows in regional languages, of which more than 40 will be original content.

“The next big inflection point for OTT platforms will be regional markets. This is an area that most players have already started focusing on. There lies a large and typically untapped audience base in the heartlands of India who will drive the next wave of users for entertainment platforms,” said Karan Bedi, CEO of MX Player.

Subscriptions vs. ads

While India is a big market for OTT companies, it’s also one of the toughest markets to generate revenue in the entertainment space as users are accustomed to watching content for free on YouTube or through pirated channels.

In 2019, three years after Netflix entered India, the US-based media giant launched a mobile-only subscription plan for Indian users, priced at INR 199 (USD 2.73). Compared to its regular subscription of INR 499 (USD 6.85)—the cheapest in the world—the lower rate was aimed at Gen Z viewers, who seek entertainment largely on their smartphones. While Netflix began to charge higher subscriptions in the US and across Latin America, making its plans 13–18% more expensive, the company didn’t make any changes in India.

Read more: Global music streaming platforms tune in to capture the India market

Most Indian OTT companies realize that acquiring users means luring them with free content. Thus, they have adopted a mix of subscription-led offerings, or SVOD (subscription video on demand), and AVOD (advertising video on demand), which is free.

Voot, which launched its subscription platform, Voot Select, a year ago, said it has managed to add 1 million subscribers. However, it is to be noted that many of these paying users come from big cities.

“The contribution from lower-tier cities for the subscription model is definitely smaller than the metro cities. Since they are still getting accustomed to OTTs, it will take some time for audiences there to start paying for content,” Rakshit said.

The imbalance between the adoption of AVOD and SVOD models is evident from Voot’s example. While it has 1 million paid subscribers, its free offering has 80 million monthly active users.

“I believe people are seeing the value in premium content and will increasingly become comfortable with paying for it in smaller markets as well. Businesses will need to experiment, innovate, and re-evaluate pricing models that make for an appealing proposition for the consumer. We’re considering multiple business models and will make an announcement once we firm up the plans,” Bedi said.

According to Kalra, ZEE5’s paid viewership has grown by 45%. “With audiences constantly looking for captivating and entertaining content, we believe in continually ramping up our bouquet of offerings with real, relevant, and resonant stories to ensure there is something for everyone at ZEE5, across AVOD and SVOD platforms,” he said.

Amazon and Netflix have not ventured into the hybrid model. Instead, they offer different price bands that determine how many users can simultaneously log in as well as the number of devices the content can be accessed on. Unlike global players that have dynamic pricing, Rakshit from Voot said his company is not following suit yet.

“We have not added any pricing complexity on our platform since it’s too early for us to do that. Once we create the momentum, we will come up with different price points for diversified offerings. But that is further along in our journey.”

Shah of Media Partners Asia said people will not subscribe to all the available platforms. “It’s about who has better content and who understands the pulse of their consumers. Compared to ad-based revenue, OTTs are better off making money on subscriptions by having more relevant content.”

As companies go back to their drawing boards again and again to determine the right prices for users, viewers like Kumar, who has been toying with Amazon’s new, free miniTV, are the real winners.

“Tales from India’s Towns” is a series where KrASIA shines a light on technologies that are changing lives in smaller Indian cities, where 500 million internet users will come online in the next few years.

KrASIA is a digital media company reporting on the most promising technology-driven businesses and trends in the world’s emerging markets.

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