Perspective and unreliable media market in India
India Today is more than 1 billion 300 million residents, which makes this country the second largest market of consumers in the world… A huge market is attracting the attention of global companies, including those from the television business.
India Today is more than 1 billion 300 million residents, which makes this country the second largest market of consumers in the world… A huge market is attracting the attention of global companies, including those from the television business. In particular, Netflix and Amazon have begun to actively explore this territory in 2016. Whether their appearance in India marks the beginning of reformatting local television market? What is the Indian TV market today? What awaits this market in the near future? What are the difficulties for the companies that plan to develop cooperation with Indian partners?
Currently, India is the second largest TV market in the world after China. Penetration of digital TV in India reached 68.9% (118,26 mln.) of TV households by the end of 2015, and is expected to reach up to 77.2% (136.34 mln.) by the end of 2016 according to researchandmarkets data. At the end of the year there will remain in total 41 mln. subscribers of analog TV, 35-36 mln. of analog TV households are planning to switch to the digital TV as early as 2017.
However, currently there are over 462 mln. users connected to the Internet in India, according to researchandmarkets data. During 2016 the number new Internet users in India increased up to 108 mln. of subscribers, which is almost a quarter more. According to the data it follows that the Indian TV market is actively increasing its weight thanks to new connections to digital networks. For example, the number of users of Amazon, as of December 2014 amounted to only 10% of the total number of Internet users in India, and as early as December 2015 this number has increased to 30%. In early 2016 this forced Amazon to announce that they will invest 3 billion US dollars in the development of its subscriber base in India. 300 mln. of these funds were invested in the production of local content for their premium package according to Forbes. And as early as September 2016 CEO of Amazon Jeff Bezos declared in the media that the company decided to increase its investment in the Indian digital market up to more than 5 billion US dollars.
It should be noted that the SVOD market in India is still at the initial level. It is believed that the number of SVOD subscribers will increase to 105 mln. in 2020 from 15 mln. as of 2015 (12 mln. subscribers in 2014).
It should be noted that as of today total number of Internet connected users in India amounts to 34.8% of possible 100%. According to forecasts the number of Internet subscribers in India will double in the next 5 years. Therefore the rapid and dynamic development of digital television is expected on the market.
The second important factor as of today, after increasing subscribers network, which also significantly affects the development of the television market in India, is a low cost of subscription fee. In India, it amounts approx. 4-5 $ per month. Despite this, during 2015 cable operators and TV channels gained income from subscription fee of about 5 bln. 400 mln. US dollars, which is almost twice as much compared to advertising income during the same period. In 2016 the increase of profits from subscription fee is expected to be up to 6 bln. 100 mln. US dollars, and profits from advertising up to 3 bln. 150 mln. US dollars.
At the same time in the USA, Canada, the EU – the price of a subscription fee ranges from 40 to 100 $. But the profits from subscriptions and advertising is kept in the same proportions, i.e. half as much income is earned from advertising compared to subscription fee. For example, in the USA, income from advertising on various TV platforms is expected to be about 69 bln. US dollars by the end of 2016. Dollars. The United States, and the income from subscription fee should be approx. 140 bln. US dollars. So the size of the market is 20 times less due to the difference in the price of services.
Currently Amazon and Netflix have to consider the opportunities of the Indian market. The first service set the price at 60$ for a yearly subscription to its premium package, which is considerably less than the yearly subscription to Netflix in India, which amounts 90$ per year.
It should be also noted that the advertising market exclusively in the Indian segment of the Internet totals about Rs 7300 crore (about 1 bln. 80 mln. US dollars) with 57000 crore (just over 8 bln. US dollars) that advertisers spent in total for the last year in India according to Digital Media Agency BGV Digital. This amount is small for such a market like India, but at the same time it is the fastest growing segment that increased by 45% in 2016. But in general, it still falls behind the linear television in terms of overall advertising expenses.
The third important factor for all those which want to cooperate with Indian TV channels is the reliability of statistics.
Indian statistics “differs” depending on source in all industrial branches.
There is a lot of irony in the international press about the correctness of calculating GDP of India and this also applies to cinema statistics.
For example, Girish Johar representing Essel Vision Productions Ltd says that income (from the distribution of films) is earned from about “13 000 visible cinemas” in India. Mohan, who works in Business Standard, says that there are about 10 thousand cinemas in India.
The report of PricewaterhouseCoopers on the Perspectives global medias and entertainment in 2016-2020 contains the number of 11 200 cinemas as of 2014.
As can see the difference between the reports is approximately 3000 cinemas. This fact should have been an alarm signal, but these numbers are just quoted in the media and nothing else happens.
For example, in 2015 there were only 4,115 cinemas in the UK according to the UK Cinema Association.
Statistics in the television industry is complicated as well. Digital industry should have resolved the issues of reliability of data, but issues arise time and time again.
For example, there are a lot of TV channels in India. As of 2016 there are about 830 TV channels in India. Up to 400 of them – are only 24-hours news TV channels. This is due to the fact that there are 21 official languages in 29 states and 7 territories with all social classes of 1 bln. 300 mln. people of this large country. And, accordingly, there should be all types of TV channels with their own languages.
At the same time, as noted above, as of 2015 there are only 15 mln. unique pay-TV subscribers according to Forbes. The head of Sony Pictures Network India (SPNI) Uday Sodhi at IDOS 2016 conference: OTT advertising vs TV advertising, which was held in the autumn in Goa (India), said that the OTT platforms created active audience – that’s about 70 million people in India.
As a consequence of the confusion in statistics and, accordingly, predominance of offers over the solvency of potential customers, international producers and distributors of content in Indian market encounter the issue that Indian platforms and TV channels mainly offer to cooperate under the revenue share scheme. Nobody wants to take risks. Few companies agree to buy the rights for a fixed price, mostly international TV corporations agree to operate in such a manner: Discovery, Fox, etc. But they need to be provided with a unique world-class content. Their financial capacities allow to independently produce the required content or order it from the partners.
If your company would agree to cooperate under the revenue share scheme with the local TV channel or platform or would even specify terms of provision of statistical reports on views in an agreement with an Indian partner, that views which affects the amount of your income, more likely you would not see these reports within the prescribed terms. Furthermore, statistical data will look like excel sheets filled in by hand. Therefore, it is important to additionally specify in the contract the possibility of independent tracking of statistics via the link provided by the partner to a special page of the platform with a login and password. This does not guarantee that you will be given permission to access the page in time. But this is still better than situation, when in 3 or 6 months you receive a letter with a statement that your content was used, but you earned nothing.