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What you actually pay for video on demand

LiveMint logoLiveMint 25-06-2017 Shaikh Zoaib Saleem

With the increasing penetration of better-quality mobile data services, as well as the availability of smart devices at lower price points, internet consumption is rising in India. While an average Indian used to spend more on voice services than on mobile data services till 2013, now 65% of an average mobile bill is spent on data, according to a report by Internet and Mobile Association of India (IAMAI), and it added that the average monthly spend on voice services in 2013 was Rs214, compared to Rs173 spent on data. In 2016, the spend on voice fell to Rs124 while data spends rose to Rs225.

According to the Nokia MBit Index 2017, the average 4G user in 2016 used more than 1,407 MB data per month as against about 849 MB and 259 MB by 3G and 2G users respectively. But what are people doing with all this mobile data? A large part is going towards watching videos. Video and social networking together constitute 65-75% of the traffic, the Nokia report said.

To cater to this demand, in the past few years, several video-on-demand (VoD) services have come up in the country. Ajit Mohan, chief executive officer, Hotstar said that in just 2 years the market  has shifted from one where there was practically no availability of meaningful content on demand, to today, where the Indian consumers can watch TV shows, movies and sports from around the world. Hotstar is an online video streaming platform of the Star TV network.

There are about 32 VoD companies in India. These include big names like Hotstar and Netflix; and others such as Viu and Ozee.

Consumption of online videos is rising because of better internet connectivity, which in turn gives the users more control over what they want to watch and when they want to watch it. “VoD is one of the fastest-growing categories. With (cheap) internet and cheaper phones, watching content is becoming mainstream,” said Kedar Gavane, vice president, India, comScore, a digital research and marketing agency.

Data prices have significantly reduced in India over the past few years; particularly after the launch of Jio’s 4G services in 2016. This was followed by an aggressive price-war among telecom companies and as a result consumers started consuming much more data.

According to Mary Meeker’s Internet Trends 2017 analysis, in March 2014 the average cost of 1 GB data in India was $4.4. This came down to $3.7 in March 2016 and $1.9 in March 2017. But that was the average price. At the lowest end, Jio’s rates stood at $0.17 per 1 GB. With 1 GB of data, you could watch high-definition (HD) videos on Hotstar for about 1 hour.  

The steep drop in prices has also led to more users coming online. According to the IAMAI report, the number of mobile internet users in India is estimated to touch the 420-million mark by June 2017, with usage in rural India growing faster than in urban India. This increased usage is fuelling, as pointed out above, social media usage and VoD services.

With the price of data crashing in India, what are people doing with all this data? It seems that people still love to watch TV content. “What they don’t love is the linear TV experience, where channels present programmes only at particular times, one episode at a time on non-portable screens, (and) shows not launching in all countries at the same time,” a Netflix India spokesperson said. If cheap data is the road, VoD is the car that people buy to zoom on that road. VoD not only puts the consumers in control of what they want to watch, when to watch and how much to watch; it also makes the watching mobile, literally. A majority of the people consume these videos on the smaller screens (read mobile phones), data from comScore suggests. Of the 200 million digital population in India in April 2017, over 169 million were on mobile devices, it says. 

According to AppAnnie, a mobile app research company, the top 12 VoD services in India had a combined viewership of over 151 million in May 2017, compared to just over 52 million in July 2016. The top 12 are: Hotstar, JioPlay, Voot TV, Amazon Prime Video, TVF Play, Sony LIV, Netflix, Ozee, ALT Balaji, Ditto TV, Eros Now and Viu. These companies make up over 90% of the VoD market in India.

Despite its rapid expansion, the VoD market in India is still in a raw state. Most users are still trying out the market and are unsure of which services to subscribe to and how to compare one service provider with another. The silver lining seems to be that the backbone technology for these services—mobile data—is now more or less in a mature state and choosing the cheapest and fastest data provider is relatively easy.

When choosing from VoD providers, you need to understand their monetization models. Three models are most popular. One model is A-VoD (advertising-based VoD), where you can watch the videos without paying any charge, and the service provider generates revenue from advertisements. For example: Voot.

The second business model is S-VoD (subscription-based VoD). Here the subscribers pay a fee to access the content. For example: Netflix.

The third category is called freemium, and it includes VoD providers like Hotstar. This model is fast gaining ground. Here, some content is made available without any charge while the premium content is only for subscribers. 

When it comes to viewership, free or freemium content is consumed more on mobile devices while subscription-based premium content is consumed on larger screens, such as TVs. Data from comScore suggests that while a majority of visitors to Hotstar and Voot were from mobile devices, over half of Netflix and Amazon Prime Video’s views are on a bigger screen.

As these platforms cater to different audiences, their pricing and content is different, as a result it is difficult to compare one provider with another objectively. But one trend is very clear: despite the presence of subscription-based operators like Netflix, the Indian industry is predominantly advertising driven, said Mihir Shah, vice president, Media Partners Asia, a research company that tracks media and telecom sectors. The other thing we know is that the market is growing. “India’s online video market generated $227 million in revenue during 2016. As the ecosystem matures, total revenue could reach $1.5 billion by 2022, at a 35% CAGR (compound annual growth rate (CAGR),” said Shah.

While majority of the VoD providers do not charge their viewers for watching videos, it does not mean that the services are free of cost.

Videos are data heavy and you need a fast and reliable internet connection to see them. This connection is not free. It has to be paid for.

For instance, Netflix recommends that your internet connection should support download speeds of at least 5 Megabits per second (Mbps) if you want to watch its HD quality videos. If you want ultra HD videos, you would have to upgrade to 25 Mbps. If your data plan requires you to pay per megabits data, charges could go up pretty soon. You could use broadband, but high bandwidth plans come at a premium too.

This cost comes into play with both advertising and subscription based VoDs. “You are paying in the form of data. That is true to all the over the top (OTT) platforms, including music and video. There are different intelligent ways in which different operators are leveraging technology to ensure that you do not end up using too much of bandwidth,” Ashwin Ramaswamy, chief executive officer and co-founder of Mubble Networks Pvt. Ltd, which developed the Mubble app to help prepaid mobile users track their telecom and data spends. An OTT platform by-passes the traditional broadcasting media such as channels and networks, and reaches the consumers directly over internet. 

To reduce the costs of consuming data-heavy videos, a lot of people access them over Wi-Fi networks instead of mobile data connections. “If you are talking about replacing your DTH (direct to home TV service) with a VoD service, watching it on your mobile data does not make sense. You need high-speed broadband for that,” said Ramaswamy.

To control mobile data costs, you can check your phone’s data usage app to know how much data you are using over Wi-Fi and how much on your mobile connection. Wi-Fi is usually cheaper than mobile data, so try to use it whenever you are near a trusted hotspot. Keep the phone Wi-Fi in ‘on’ mode, set it to give primacy to Wi-Fi over your data connection. This way, whenever you are near a known Wi-Fi hotspot, your phone will automatically switch to Wi-Fi, and save your precious 4G data.

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