Indian OTT industry poised for growth. But are low prices sustainable?

Another year has been lost to the pandemic, and various sectors such as the real estate, hospitality and mobility are counting their losses and making projections of when they’re likely to attain their pre-Covid growth levels. Amid this doom and gloom, the media and entertainment sector presents an encouraging picture. According to a recent report by the Confederation of Indian Industry and Boston Consulting Group, India’s media and entertainment industry has revived to pre-Covid levels and is expected to grow to $55-70 bn by 2030 at 10-12% CAGR, driven mainly by strong growth in OTT, gaming, animation and VFX. The report explains that the media and entertainment industry contracted by 10% year-on-year in 2020, its market size decreasing from $26 bn in 2019, to around $24 bn in 2020. This contraction was mainly due to a decline in advertising revenues across mediums such as print, television and radio. However, digital led-consumption of OTT services and gaming are now driving the growth, helping the industry grow 12-16% year-on-year in 2021, to a market size of $27 bn. Today, OTT has a 7-9% market share in India’s $27 bn M&E industry. However, by 2030, its market share is expected to increase to 22%-25%. Meanwhile, television’s market share will decline from around 35% to 24%. The growth in the number of Indian households with a Pay TV subscription, such as Tata Sky and Dish TV has more or less stabilised, only growing at 2%. However, India is seeing a growth of 51% in the number of households with a subscription-based video-on-demand service or SVOD. This growth in subscription-based OTT services offered by the likes of Netflix, Amazon’s Prime Video and Disney+ Hotstar can be attributed to the improved internet and smartphone penetration and payment mechanisms.

Most importantly, these players have made significant investments in content, pricing innovations and bundling to create niche properties. Notably, streaming giants such as Netflix are offering their India plans at affordable prices, compared to the pricing plans for other geographies. The CII-BCG report explains that the Indian pricing plans of global streaming giants are on average, 70-90% cheaper than their prices for the US market. Increased market competition, with local OTT players also entering the fray, are driving this reduction in prices for OTT services. And global streaming giants are keeping their fingers crossed. In 2020, the global executives for Disney+ noted that the company’s India offering, Disney+ Hotstar, brought down its global average revenue per user (ARPU). And last year, Netflix CEO Reed Hastings said that the company was ‘still figuring out the Indian market’, also calling it a ‘speculative investment’, comparing the Indian market of 2021 with the Japanese and South Korean markets of five years before. As the experts pointed out, the Indian OTT industry has just started scaling up, and will continue to remain a high volume market. Hence, expect more pricing experiments and bundling of OTT services with your mobile data plans as more and more global streaming players tap into the Indian market.

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