FICCI-KPMG-Report-13-FRAMES

112 The power of a billion: Realizing the Indian dream
Globally, the Subscription Video on Demand model has the
largest user base and revenues.
US Video on Demand market - Segment wise
size
• Given the low ad revenue potential on digital Vs
traditional, leveraging low cost content (Eg. Short
videos, back dated episodes etc.) is critical
• For long format content online, subscription based video
on demand dominates globally. In the medium term,
given the low rates for Cable in India and the high cost
of bandwidth, providing this at competitive price points
relative to cable may be difficult (especially for mass
adoption)
• However initial launches of video on demand services
have seen an encouraging response. As the catalogue,
technology and broadcast platforms improve, this could
be a strong revenue generator for the industry
Source: IHS Screen Digest June 2012; Company Annual Reports; KPMG in India Analysis
Please Note: Growth in the SVOD model is driven by Netflix decision to charge directly for online
access from Q4 2011
The key to the success of the SVOD model has been low
subscription prices. For example in the US, where monthly
cable subscriptions are over USD 20, Netflix’s pricing of
USD 8 per month is very attractive. However, access to
low cost content is critical in order to achieving these price
points. Netflix was able to do this by securing initial deals
that were priced at a fraction of the cost of comparable
cable deals. However, content costs have increased at
a 70 percent CAGR 35 in the last 3 years and are placing
significant stress on Netflix’s low price subscription model.
“
We are at an inflection point for video
on demand uptake in India. The growing
consumption of online video; better
connectivity and more options for
broadband; and stiff competition among
mobile and pay TV operators to differentiate
on the basis of content, all point towards
rapid growth of video on demand. While
a majority of on-demand video viewing is
short form (20 minutes)
content that is consumed on TV.
“
- Kallol Borah
Director,
Lukup Media
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SVOD Service Provider
Netflix
Streampix
Dish/ Blockbuster
Implications for Indian players
Typical Subscription
Charges
USD 8 per month
USD 5 per month
USD 10 per month
Source: Macquarie Equity Research September 2012 – “Netflix virtuous circle turning vicious”
• Ad based monetization through short format, made
for digital content is the more immediate monetization
opportunity through online video in India and has a good
level of exploitation already
• Broadband penetration remains a challenge to large
scale adoption of traditional long format content
• In India and globally, video advertising is one of
the fastest growing advertising segments online;
Opportunity for content owners to benefit from this
through made for digital content
35. Macquarie Equity Research September 2012 – “Netflix virtuous circle turning vicious”
Summary
In categories such as e-books and music, where the model
is largely established in more advanced countries, the
major challenge in the Indian market will be to recreate this
at price points that work, create successful micropayments
models, manage the threat of piracy and deliver a superior
user experience that discourages switching to pirated
content.
However, for players in Print media (Magazines/
Newspapers) and Video (Television/ Movie), business
models are still evolving globally. While players in India in
the sectors can learn from global experiences, they will
need to innovate to develop a sustainable model.