How ready is India for the digital disruption?

MUMBAI: The Indian media and entertainment industry is enamoured by the possibilities that the digital world poses for it. Within digital, ‘video’ and ‘mobile’ seem to be most used and often abused words. To tap in and make the most of this ‘digital video’ revolution that  the country is set to see in 2016, several small and big players have rolled out or planned VOD or OTT services..

But is India ready for this digital disruption? Have those who are betting high on the success of the video business really taken into consideration the groundwork and infrastructure needed to actually make profit?  Moderator and Bloomberg TV India consulting editor Vikram Oza raised these questions at FICCI Frames 2016 during a panel discussion - ‘And the walls came tumbling down : Digital disruption.’ In front of him on the panel were  - SPN digital business EVP Uday Sodhi, Viacom18 Digital Ventures COO Gaurav Gandhi, HOOQ cofounder and content head Krishnan Rajagopalan, Arre COO Ajay Chacko and Elemental Tecnologies SVP Daniel Marshal  - each a pioneer of digital world in his own right.

Within the first fifteen minutes into the discussion, the audience had a good idea of where things stood in the digital video business. “While a fair bit of 3G and 4G is taking off, the industry is still at a nascent stage to make assumptions. Monetization, bandwidth and content needed to fall in place to set the groundwork going,” said Sodhi summing it up.

When posed a query on bandwidth costs and subscription issues, Gandhi gave an optimistic perspective. “Currently the data prices are very high. So much of the consumption behaviour we are seeing will drastically change as the bandwidth opens up and becomes cheaper. We need to aim for a setting when data prices become part of everyone’s utility bill. That is when no one will hesitate from paying for an OTT service.”

Marshal added his take from his experience of the international market and how it played out there. “What I have observed in the US is that there are more users with multiple subscriptions since the combined cost is still less than what people used to pay for their cable subscriptions. If India has to really see the end of this convergence, adaptability and bandwidth needs to be worked on heavily,” he suggested.

Another variable that is a hindrance for digital convergence is the complicated and poor payment gateways. “It is true that in India the present payment gateway options are a major challenge to both the service provider and the consumers. From my experience, a huge part of willing consumers put off payments because of the payment method. It is indeed a big challenge and a part of it is that people are still hesitant to trust their money with online payments. Thus the adoption is lower. TRAI tried to deal with the issue by strengthening the security process in the transaction and sort of got overzealous with it, which is costing the industry in a different way. I would say it will take another 5 years for the payment options to be easy and secure and ready to handle the digital disruption,” Sodhi opined.

With everyone jumping on the mobile video bandwagon and promising an on demand video service, was there a need for the players to differentiate their offerings? After all, according to Google research, the current range of smartphones in the market allowed users to have only few apps before their devices slowed down. While the industry remained a free market, this clearly meant that only few services would survive this tough competition and make their way to the users’ handsets.

To put matters into perspective, Gandhi said, “Currently 85 per cent of the content is owned between the five major TV networks and the two TV studios. The content offered by their OTT players may look homogenous because our first natural instinct is to put forth the existing content from our TV and movie library. But newer original content for the web is also being produced currently.”

Rajagopalan shared that his OTT service HOOQ, which already has a large presence in the international market, is banking on its large Hollywood movie library as the differentiating factor. “Apart from that we have also identified regional and smaller studios that don't have a contract with major broadcasters’ networks in India to provide us with fresh content. So ours is an international and regional approach.”

Acknowledging the need to create web only content, instead of banking on existing libraries, Chacko added, “What an audience individually consumes is different social viewing. The content itself needs to be disruptive if it were to survive these initial years of just investment and to break even eventually. Each player will work on its strengths and try everything and anything between micropayments (or pay per view revenue model) to ad-funded content.”

It is obvious from the discussions that there is a long way to go for India to reach a point when these OTT players can reap the optimum benefits of what they are sowing as investment today. Will they be able to make it through the dry years ahead until the infrastructure and country is ready? Is it worth the time and money that they are putting in?

Chacko addressed this with a simple comparison to the eCommerce markets. “Compared to the eCommerce business there is almost no customer acquisition cost when it comes to digital media. What we gain organically is what these eCommerce brands pay millions of dollars for. Therefore, with an almost zero marketing budget one can sustain oneself in the industry as long as one has strong content,” Chacko said.

The panel also pointed out that digital video business paves way for an exponential growth. With better devices and network, the business will grow not just by tens but thousands so it made sense to invest in it.  

The moderator then rolled the ball in the panellists court by asking them if their advertisers were buying these arguments that they gave in favour of the OTT/ digital business. The panellists unanimously agreed that media planners and buyers were excited about this newly evolving media. They were happy about giving an alternative to their clients and so were the advertisers, given the measurability and reach the media gave them.

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