PHONE IS THE NEW TV

Even super slow internet couldn’t prevent the enormous disruption in Indian television—and now we have Reliance Jio

Quartz india
Quartz india

When Mukesh Ambani speaks, India pays attention. And for good reason.

Last week, he set the country’s 180 million smartphone users drooling, even as established telecom players ran for cover.

The country’s richest man unleashed an unprecedented disruption in India’s telecom sector, announcing that his new telecom venture, Jio, will provide the world’s cheapest mobile internet data.

But it wasn’t just about low-cost calls and data.

On offer to all Jio customers was an entire package of apps ranging from news to digital payments.

Most importantly, there was the JioTV app that allows users to watch 300 live TV channels at “any point in time” and the JioCinema app with a library of 6,000 movies, over 60,000 music videos, and some 1,00,000 episodes of TV shows in 10 languages. All this on super-fast 4G data.

The Reliance Industries (RIL) chief had just put India’s online entertainment industry on steroids.

A definite “click”

In the last few years, the internet has changed the way Indians consume entertainment.

Traditionally, they have been getting their daily dose via the humble television set—175 million Indian households own them. For years, people were hooked to that one box in the household for news, movies, sports, and soap operas. Unlike in the West, owning multiple TV sets is still largely an alien idea in Asia’s third-largest economy.

Enter the internet, coupled with smartphones.

It began with YouTube—which has over 60 million Indian users now—where India’s leading entertainment companies have begun uploading both old and fresh content over the last few years. Sony’s official YouTube channel already has nearly seven million subscribers. Even leading Bollywood production houses, like Yash Raj Films, have started creating bold, online-only content for young viewers.

Most of these established firms joined the YouTube bandwagon after completely new players on the video sharing website—comedy groups such as All India Bakchod and The Viral Fever (TVF)— became household names in urban India with their short sketches and web-series.

Over the last year, many of these companies have launched their own video platforms. For instance, there’s Star India’s Hotstar, an app and website that provides domestic and international TV shows (even from other networks like HBO), movies, and live sports.

And finally, we have global firms like Netflix bulking up their India content.

Riding on the ever-increasing smartphone and internet penetration, these firms have one objective: to get 1.3 billion Indians to watch content online.

“We are going through a phase of rapid and sustained technological innovation which will permanently change the way people will access and consume content,” the KPMG-FICCI Indian Media and Entertainment Report 2016 (pdf), said.

The opportunity

Indians love videos. People with smartphones are watching them everywhere: on trains, in classrooms, in office cafeterias, and even in parliament.

A full 60% of India’s over 180 million smartphone users (2015 estimates) use the YouTube app every month. And some 66% of them consumed online videos in general (including non-YouTube videos) in 2015, compared to 49% in the previous year.

And this was the pre-4G era when only a tiny fraction of users had access to fast internet. Most had to contend with 2G internet.

Here’s how mobile data is consumed, according to the India Mobile Broadband Index 2016 and KPMG India:

What do Indians use their mobile internet for?
Video and audio 38-42%
Social networking 18-22%
Communication 16-22%
Others 20-24%

With Ambani’s Jio sparking the internet speed and price wars, the opportunity is huge. Besides, there’s the “internet for all” push from global giants such as Google and Facebook who have launched projects specifically in Indian villages to get the “next billion” online.

The Indian media and entertainment industry is worth some Rs1.1 trillion ($16.5 billion). “If the entire Indian media was a company, it would rank seventh or eighth in India,” social scientist Nalin Mehta writes in his 2015 book Behind a Billion Screens: What Television Tells Us About Modern India. This industry is estimated to grow to Rs2.26 trillion by 2020, according to the KPMG-FICCI report. And that’s perhaps why media conglomerates are reinventing themselves.

The numbers are proof of the massive opportunity. Star India launched its Hotstar platform in February. Within 40 days of its launch, its app was downloaded by 10 million people. Today this Star India platform has been downloaded by over 70 million users. Additionally, between March and June this year, users spent 22.6 billion minutes on the Hotstar app, according to a media executive who did not wish to be named.

Star India already has more than 85,000 hours of content on the platform, said Ajit Mohan, CEO of Hotstar.

“We realised that mobile can be the second or third screen (apart from the TV) in the house. The moment you get drama, sports, and news on phones, people will adopt it. We saw that we could fundamentally unleash our capabilities by making the content available on small screens,” Mohan said.

Apart from shows from the Star network, Hotstar also gives its premium members access to shows from HBO and Fox. For instance, Indians could watch Game of Thrones, the gigantic HBO hit, on Hotstar as it was being broadcast in the US.

The Viacom18 group, which owns channels like Colors, MTV, and Nickelodeon in India, has launched a similar platform named Voot. It will give users access to all Viacom brands and the company is now working towards some original programming, said Raj Nayak, CEO of Colors.

These media houses are putting all of their TV content online as they get a far bigger reach. Plus many of them believe this won’t affect their TV viewership. In the West, a couple of networks stream their content online, but cable is still dominant because consumers typically prefer live programming.

“India is a unique market where for Rs250 ($3.7) you can get upwards of 500 channels so TV will continue to dominate for a long time,” Nayak explained. In the US, cable TV subscriptions are extremely expensive compared to India. On average, the cable bill in the US runs up to $99 a month.

More consumers outside the regular TV viewership also means additional revenue opportunities for these networks. “We look at digital as another form of delivering our content and another avenue to reach out to more number of people on the go and build more streams of revenue for our content,” Nayak said.

The originals

An unmistakable sign of the future is that content is now also being made exclusively for the internet in India.

And it isn’t anything like the family melodramas popular on TV. Instead, companies are creating new series that are bold and have a clear audience in mind: the millennials.

One of the first entrants in this segment, TVF pioneered the concept of a web series in India.

Its first series, Rowdies, was made in 2012 and became an instant hit on YouTube, according to a company spokesperson.

Since then, TVF—founded by Arunabh Kumar, an alumnus of Indian Institute of Technology, Kharagpur—has created content based on a wide range of topics, be it live-in relationships or startups.

Its first major hit was the five-episode series Pitchers that eventually entered the Internet Movie Database’s (IMDb) top 250 list of TV shows, ranking ahead of even blockbuster American shows such as Suits and Downton Abbey.

“We are not denting older systems like TV that is focussing on lower middle class… masses of the yester-years. We are focussing on the newer system,” Kumar told Quartz in September last year.

His model seems robust, with funding from marquee investors like Tiger Global, which valued the firm at Rs270 crore in February. Online content creators typically make money through YouTube ads and even subtle product placements in their videos. TVF has also launched TVFPlay, a web platform and a mobile app that hosts the firm’s content.

And if all this wasn’t enough, India’s traditional production houses, too, are jumping onto the bandwagon.

Yash Raj Films, Bollywood’s largest production house, launched YFilms to host original web series. But it steered away from the age-old Bollywood formulae of romance and action; it spoke of feminism, sex, and dildos instead.

“It (a web series) has always been on the radar for us. We are talking to the millennial audience that consumes a ridiculous amount of content on the smaller screen,” Ashish Patil, who heads YFilms, told Quartz in October last year. “It’s a function of really wanting to stay relevant to this audience, where you make content not only for the large screen but also devices.”

So, the plans are ambitious. But how about the dough?

Making money

Right now, these platforms rely on advertising revenues and/or subscriptions. Some may look at monetisation through exclusive tie-ups with telecom service providers, but that isn’t a popular model.

Experts say that currently these firms aren’t really looking to make money.

“It is very early in the days for the OTT (over the top) entertainment space to talk about monetisation. I doubt anybody is right now focused on making money. Everybody is in the game because they have to. They need to be a part of the ecosystem,” explained Jehil Thakkar, head of media and entertainment at KPMG India.

“India is a cost-sensitive country and with new cheap internet services, a lot of people will use data for the first time. Once it becomes a habit, that’s when monetisation through subscription will really come in,” he said.

Nevertheless, with subscriptions, firms will need to get the math about pricing right.

Netflix, with a minimum subscription of Rs500 a month, is pretty steep compared to Hotstar which charges Rs199 for premium content. Hotstar’s Mohan said they aren’t competing with Netflix when it comes to price as their content is completely different.

“Hotstar as a whole is an advertisement and subscription-supported model,” he said.

Meanwhile, ad spend on digital sources is still low in India but is expected to grow multi-fold over the next four years. Digital ad spends stood at Rs6,010 crore in 2015. By 2020, KPMG India predicts that this will touch Rs25,520 crore.

There are challenges, too. “I think from a monetisation point it will be a big challenge once the initial novelty factor wears thin and advertisers look at actual numbers. Also, the market is very fragmented and it will only get more fragmented. The key here will be to build a subscription model,” said Colors’ Nayak.

Painfully slow internet speed

Although Ambani has ambitious plans of covering 90% of India’s population with Jio by March 2017, currently a huge chunk of Indians don’t have access to super-fast internet. The country has the lowest internet speed in all of Asia and one of the slowest in the world.

But digital firms have been working around it.

“The only constraint is who has access to data,” Mohan said. And so, Hotstar has been working on technologies that can stream videos at a low internet speed, he explained.

Global firms like Google and Facebook are also trying to fix the speed problem.

Google, for instance, has introduced a feature for YouTube videos in India that allows users to download a video and watch it later. Users can use public wifi zones with faster speeds to get their favourite clips. Facebook, too, introduced Facebook Lite, a version of the social networking app that works well with slow speeds.

With all that work going towards bringing Indians online, the revolution in entertainment has just begun.

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