Over the top (OTT) industry in India: Opportunities and challenges in providing OTT services through cable network

Abstract

Over-the-top or OTT service is defined as content, service or any application that is provided over the open internet rather than the service provider’s own managed network [1]. It is broadly classified into two buckets Closed OTT and Open OTT [2]. An OTT service is “Closed” when the network provider manages and chooses the services being provided depending on what is best or most lucrative according to him and delivers on an integrated platform. It is “Open” when the consumer gets to surf the open internet using a suitably compatible browser [2]. A large variety of services can be provided through OTT such as instant communication (messaging & voice), e-commerce, entertainment (video and music streaming), education (online video channels) etc. OTT market worldwide has shown huge prospects of growth with the OTT subscription forecasted to generate $31.6 billion in revenue by 2019 [3]. The viewership of online videos worldwide is expected to shoot up to 1.3 billion by 2016 from a base of 780 million in 2015 [4]. The OTT video service providers are interested in creating a huge presence in the connected consumer electronic devices with 46% of the world OTT market revenues expected to come from connected consumer electronic device within the home in 2017 [4]. Geographic expansion of OTT portals like Amazon, Apple and Netflix is going to be major driver behind the wide adoption of OTT services. A number of broadcasters are also providing OTT apps for all types of devices, with their share expected to be around 17% of the total OTT video market in 2017 [4]. OTT services are known for their low cost and better content, thereby it is expected that many households would give up their monthly pay TV connection for a combination of Free to Air (FTA) and OTT services. OTT services in India though are at a very nascent stage and it is estimated that there were about 12 million OTT videos subscribers in India which is expected to rise to 15 million in 2015 & 105 million by 2020 [5]. The number of TV households in India are about 168 million with 149 million of them being cable or satellite subscribers [5]. Currently there is only one OTT TV distribution platform which is Ditto TV being offered by Zee Entertainment. There are however a few domestic players in the online on-demand video services like ErosNow and Bigflix focusing on Bollywood and other regional content who have gathered a substantial user base. Lack of adequate broadband infrastructure with average internet connect speed of 1.5 Mbps and highly price sensitive consumer are major roadblocks for penetration of OTT services [6]. Multiple system operators (MSOs) like Den Network, Siti Cable, and DigiTek Network etc though are currently inactive in this domain but have shown interest in providing on demand services through their network [2]. There are many challenges associated with increasing the popularity of OTT services in India like ensuring that the availability of latest content, protecting intellectual property rights, preventing piracy and innovating new ways of monetizing services. Traditional cable TV distributors with their strong network and consumer relationships, have a clear opportunity in this area by providing a seamless service that integrates traditional and online TV and through a single device and a single operator. Their nuanced understanding of the local consumer needs can also help in providing differentiated and customized services thereby creating better value proposition for both the consumers and businesses. If OTT has to penetrate to the masses in India a partnership between the internet providers and last mile cable operators (LCOs). Currently, the LCOs reach up to 75% of the homes while the fixed line internet providers reach only 10% of the homes [5]. To increase the reach from 10% to 75%, LCOs will have to play the vital role of connecting them to the internet and thereby providing a variety of value add-on services to their consumers. Many MSOs are already offering broadband services in addition to their cable services. There are huge synergies possible in this partnership as OTT services then can be bundled along with their broadband connections and be made available to the consumer in special deals and packages. With the increasing digitization of cable in India where in all cable connections are expected to be converted to digital by end of 2016, there is a clear opportunity for the LCOs to partner with fixed line internet service providers to provide OTT services to the consumer especially in cities which do not have 3G or 4G/LTE connections. In this report, the opportunities and challenges that exist in the Indian market for OTT services through the cable TV network have been studied. The industry structure as well as the credible value proposition that OTT services would provide for each member of the value chain has been analysed using the business canvas model. Further, the scope of the feasible services that could be provide and the potential size of the market has been estimated. In the end, we suggest the key parameters that an OTT aggregator needs to look into before entering a new geographical area and also list down some of the challenges that needs to be aware o