Digital Media Growth Opportunities in India · operators etc. are building various platforms to capture the growth in video and music streaming services. These players are trying

Digital Media Growth Opportunities in Indiafor South East Asian Countries

August 2015

2 | Digital Media Growth Opportunities in India

3Digital Media Growth Opportunities in India |

Introduction ....................................................................................5

Executive summary ........................................................................7

Section I: Emerging opportunities in digital media ........................10

1. Digital video space ................................................................................................ 11

2. Changing consumer preference towards short form & original content .....................12

3. Platforms driving digital media consumption ..........................................................14

4. Increasing demand for regional / vernacular content ...............................................17

5. SpecificcontentforfocusedTG..............................................................................18

Section II: Enabling opportunities for the growth of digital media players ................................................................................201. Consumer aggregation .......................................................................................... 21

2. Introductionof4Gandincreasedpenetrationofhigh-speedbroadbandservices.......23

3. Growthofpaymentwallets ....................................................................................24

4. Partnerships ......................................................................................................... 25

Conclusion ....................................................................................28

Glossary of key terms ...................................................................30

In this report

IntroductionSupportedbyafoundationofsolidmacroeconomicperformanceoverthelastdecade,themediaandentertainment(M&E)industryinSoutheastAsia1ispoisedforstronggrowth.Thesemarketsprovideauniqueopportunitywithdigital,asmobilepenetrationisinexcessof100%whilepenetrationoftraditionalinternetandsubscriptionTVservicesintheregionremainsbelowworldaverage.Theregionisalsowitnessingastronggrowthinsmartdevicepenetration,broadbandpenetration&theuptakeofhighspeednetworksof4G.

NationalgovernmentsinSoutheastAsiaarealsotakingfurtherstepstofostergreateraccesstobroadbandinternet,furtherbuoyingthemediaandentertainmentindustries.Althoughtheheadwindofintellectualpropertyconcernsremains,contentcreationisflourishingaslargecorporationsembraceamulti-platformworldandascitizensconsumesocialmediain significantquantities.

TheIndianeconomycontinuestosurgebecomingthesecondfastestgrowingglobaleconomyandthefourthlargesteconomy.India’sincreasingpercapitaincome,growingmiddleclassandworkingpopulation are generating huge domestic demand for leisure and entertainment services.

Withmorethan600televisionchannels,100millionpay-TVhouseholds,70,000newspapersand1,000filmsproducedannually,India’svibrantM&EIndustryprovidesattractivegrowthopportunitiesforglobalcorporations.TheIndianM&EsectorispoisedtogrowfromINR1,026billionin2014toreachINR1,964billionby2019,ataCAGRof13.9%,agrowthratethatisalmosttwiceascomparedtotheglobalM&Eindustry.

AsIndiagrows,theMedia&Entertainmentindustryhasflourishedwiththedemandforbothtraditionalanddigitalcontentsurging.TheIndianDigitalsectorisonthecuspofastrongphaseofgrowth,backedbyrisingconsumersandrelatedrevenuesacrossallsectors.Theindustryhasbeenlargelydrivenbyincreasingdigitisationandhigherinternetusageoverthelastdecade.By2018,Internetadvertisingwillemergeasthethird-largestsegment,withashareofabout16percentinthetotalM&Eadvertisingpie,withacompoundedgrowthrateofaround27.7%p.a.

1. SoutheastAsiamarketisbuiltonthebasisof6majorgeographiesofSingapore,Vietnam,Malaysia,Thailand,PhilippinesandIndonesia,whichform>90%ofsoutheastAsia’sGDP


72 Mn

Digital Video

Viewers (2014)

140 Mn

Smartphone users

(2014)

185 Mn

MobileInternet users

(2014)

3.2%

Internet related

contributionto GDP

$ 7996.6 Bn

GDP

1.27 Bn

Population(2015)

36%

3G Users (% of wireless

users)(2015)

89.4 Mn

Wireless Users

(2015)

104.9 Mn

Broadbandsubscibers

(2015)

254.5 Mn

Internetsubscribers

(2015)

The second fastest growing major economy

in the world after China

A young nation with a median age of

26.2 years

A growing middle class, rising per

capita income and a rise in the working population - fuel

growth and demand for goods and servic-

es in the future.

Source: : World population prospects, IAMAI Report, EY Future of TV Report, TRAI


ExecutivesummaryEmerging opportunities in digital media:

• The next stage of digital consumption after travel and ecommerce is expected to come from digital media, especially video

TrendsinonlinesearchesinIndiasuggestthatentertainmentisbecomingthelargestsoughtaftercategorycontributingto31%ofallsearches.Videosandmusiccurrentlyrepresentthehighestproportionoftheconsumerpreferenceswithintheentertainmentcategory,collectivelyaggregatingtoover90%.ThevideoviewingaudienceinIndiaisexpectedtogrowsignificantlyinthenearfutureatacompoundedannualgrowthrate(CAGR)ofover50%.Withtheincreasinggrowthinvideoaudienceandconsumption,theIndianmarketprovidesanopportunityforinternational studios and content owners to showcase their content and garner additional revenues.

• ‘Snackable’ content consumption would drive the growth in consumption in the Indian market

Drivenbytheyoungeraudiences(between18–35yearsagebracket),constitutingtoaround80%oftheusers,consumerpreferencesandcontentconsumptionpatternswilldriveanddeterminethefocusareasforthegrowthintheOTTmarketin India. Consumers have shown increased preference towards short form of content;withtheaveragelengthofvideoviewedinIndiabeingaround20minutes.Inaddition,62%ofthecontentconsumedonYouTubeisshort-formcontent.ThistrendhasledcontentproducerslikeErosInternational&Startofocusonexclusiveandsnackablecontent.

• Various platforms like OTT, MCN and music streaming are driving digital media consumption

VariousplayersintheM&Eindustryincludingbroadcasters,Telcos,studios,DTHoperatorsetc.arebuildingvariousplatformstocapturethegrowthinvideoandmusicstreamingservices.Theseplayersaretryingtoleveragetheirindividualstrengthstocapturemarketshare.TopMCNsinIndiacateringtokids,entertainment&foodcategorieshaveover3mnsubscribersandcloseto100mnviews.ThisspacehasseeninvestorinterestrecentlyandinternationalplayersareseekingentryintoIndia through partnerships or investing in Indian platforms.

• The changing face of digital user is expected to lead to an increased focus on regional and vernacular content

ThenextwaveofgrowthinIndia’sinternetpopulation,enablingIndiatobreachthe300millioninternetuserbaseinthenearfuture,isexpectedtobefromtierIIandIIIcities,thusenablingthegrowthofvernacularandregionalcontent.Currently45%oftheusersconsumeregionallanguagecontentandthispercentageisexpectedtoincreasewiththegrowthofinternetusers.Digitalmediaplayersshouldthusconsideraggregating/producingvernacularcontenttocapturethenextsetofusers.


• With the evolving internet audience, there is an opportunity for digital media content producers to create ‘target group centric’ content

Withrapiddigitalisation,thefaceofnewdigitalIndiaisexpectedtobefarmorediverseinthetimestocomeandmovingawayfromtheold,familiarfigureofanurban,mid-aged,upper-middleclassmale.By2018,Indiaisexpectedtohave1.9malesforeveryfemaleamongthe18-24yearagebracketalongwith54%oftheaudienceovertheageof25years.Astheaudienceisshiftingfromthefamiliarpersona,therewillbeaneedtodevelopcontentforaspecifictargetaudience.Manycontentcreatorsaretryingtocatertothischangingdemography&psychographyoftheaudienceandareproducingcontentdirectedtowardsaspecifictargetgroup.

Enabling opportunities for the growth of digital media players:

• With increase in digital consumption, India and such other Asian markets are expected to help media conglomerates in driving consumer aggregation

Therapidup-takeofconnecteddevices,especiallysmartphonesandtabletsisinstrumentalinmediaconsumptionshiftingbeyondtraditionalmediaformatssuchasbroadcastandcableTVtowardsdigitalmediums.ThenumberofsmartphonesinIndiagrewastaggering54%during2014,reaching140millionandisexpectedtocontinuegrowingatafastpace.Today,IndiaisonitswaytobecomethesecondlargestuserbaseintheworldbehindChina.IndiahasbecomethesecondlargestmarketforsocialnetworkinggiantslikeFacebook(withover108mnusers)&Linkedin(withover30mnusers)acrosstheworldandisexpectedtosurpasstheUSAtoleadtheglobaltallyofthelargestFacebookuserbaseonmobiledevicesby2017.

• Increased penetration of 4G and high speed broadband services are expected to provide an opportunity for additional media services with increased consumption

Eventhoughamajorproportionofwirelessinternetsubscribersare2Gusers,theadoptionof3Gisgraduallyincreasingandnowconstitutesabout36%oftheoverallwirelessinternetuserbase.4G(LTE)isalsobeginningtosetitsfootinthemarketwithAirtelbeingthefirstoperatortolaunchitsservicesin296townsacrossthecountry.4Gisexpectedtocontributearound37%ofthemobiledatatrafficinIndiaby2018.Withthisgrowth,thereexistsanopportunityforincreasedconsumptionofhighbandwidthservicesincludingvideoandotherinteractivemediaservices

• Payment wallets & operator billing models are expected to enable monetization and reduce the challenge of under penetration of credit card payments

Subscriptionrevenueisconstrainedbylowcreditcardpenetration,paymentgatewayfailuresandotherfactorsthathamperonlinepayments.Currently,only1-2%oftheconsumerspayformediacontentonline.MobilepaymentsareexpectedtogrowfromUSD0.1bnin2012toUSD1.4bnin2015ataCAGRof14%.However,differententitiesinthemobile/onlineecosystemarebuildingmobilecentricwalletstoovercomepaymentissuesandhaveseenuptakeinvariousdigital

Digital Media Growth Opportunities in India | 9

services.Dailypacksandtransactionbasedmodelsarealsogainingmarkettraction.

• The OTT Market in the future is expected to evolve into one which has more partnerships which bring more complementary proposition suiting their strengths

Withtheevolutionofthedigitalmarket,partnershipswithinthedigitalsupplychainareevolvinginordertocreatecomplementaryvaluepropositions.Thespacehasalsoseeninterestfrominternationalmediaplayers,especiallyplayersintheSouthEastAsia.ManyglobalplayersareenteringintotheIndianmarketarelookingatlocalpartnershipsinordertoprovide‘Glocal’Offerings.ThesepartnershipsareespeciallyseentheOTTspace,wherethereisincreasingcompetitionandchallengesaroundmonetization.Themarketisexpectedtowitnessmoreverticalandhorizontalpartnershipsandacquisitionstodrivesynergies.

Key trends Opportunities

Highconsumptionondigitalmediaespeciallyvideo

Opportunityforinternationalstudiosandcontent owners to showcase their content and garner additional revenues

‘Snackable’contentconsumptionis driving the growth

Opportunityforcontentproducersbyfocusingonshortformorexclusivecontent

OTTandMCNplatformscapturing growth in video and music streaming consumption

Interestsfrominternationalplayersentering into India through partnerships or investments

Growthofregionalandvernacular content

Aggregatingandproducingvernacularcontentmayhelpcapturelargershareofusers in India

Diverseandspecificcontentneeds of digital audience

CreatingTGcentriccontent

RapidincreaseinDigitalconsumption through connected devices

Indianmarketswouldhelpmediaconglomerates to drive consumer aggregation

Highspeedbroadbandandincreased internet penetration

Opportunityforincreasedconsumptionofhighbandwidthservicesincludingvideoand interactive media services

Increasedusageofpaymentwalletandoperatorbillingmodel

Buildingmobilecentricwalletsmayovercomepaymentissuesenablingmonetizationanduptakeofdigitalservices

Partnerships shall drive and help theOTTmarkettoevolve

Drivesynergiesfrompartnerships,acquisitions,globalplayersenteringthemarket,etc.

In nutshell


Section I: Emerging opportunities in digital media


1. Digital videoThevideoviewingaudienceinIndiaisexpectedtogrowsignificantlyinthenearfutureataCAGRofover50%.By2017,IndiaisexpectedtosurpasstheUStobecomethe2ndlargestvideoviewingaudienceglobally.

TrendsintheonlinesearchesinIndiaalsoreflectthatentertainmentisthelargestsoughtaftercategory.Videosandmusiccurrentlyrepresentthehighestproportionoftheconsumerpreferencesintheentertainmentcategory.Inaddition,thestudyalsoshowsthepreferenceoftheIndianconsumerstowardsvernacularandregionallanguagecontentwith93%ofthetimespentonvideosinHindiandotherregionallanguages.

Trends for online searches in India

Entertainment,31% Other, 4%

Live TV, 1%

Music, 32%

Video, 61%

Other regionallanguages, 30%

English,7%

Hindi, 63%

Games, 2%

Consumer electronics, 14%

Education, 11%

Socialnetworking, 10%

Source: Google Report: Online opportunities in Telecom

News and info, 8%

Finance, 8%

Health, 6%

Others, 12%

47 58 72110

160

250

2012 2013 2014E 2015E 2016E 2017E

74 105195 21572

250

447

710

2014 2017

Brazil US India China

Online Video Audience in India (in mn)

Comparison of Online Video Audience (in mn)

Source: EY Future of TV Report, Statista


VariedplayerslikeTelecomOperators,ContentAggregators,MediaEntities,DTHPlayers,etc.haveventuredintheOTTspacewithintheIndiaMarket.Theyareleveragingtheirstrengthsinordertoestablishafootholdinthemarket.

LiveTVstreaming,however,isstillatanascentstageinIndiaandisprimarilydrivenbysportsandevents.Comparatively,Video-on-Demand(VoD)serviceshaveahigherpenetrationamongtheIndianaudience.Youngadult,entertainment&celebritydrivenclipsare popular formats in short form content.

Time spent per month: 88 mins Time spent per month: 52mins

Reach35%

Reach14%

Video on demand Live TV

Penetration of apps

Time spent by smartphone user (min/ month)

3024 26

18-24 yrs 25-34 yrs 35+ yrs

21 2329

18-24 yrs 25-34 yrs 35+ yrs

Source: Nielsen Informate Mobile Insights

With the increasing growth in video audience and consumption,theIndianmarketprovidesanopportunityforinternational studios and content owners to showcase their content and garner additional revenues.

2. Changing consumer preference towards short form & original contentConsumer preferences and content consumption patterns over the internet have evolved overaperiodoftime.ThisevolutionisexpectedtodriveanddeterminethefocusareasforthegrowthintheOTTmarketinIndia.Shortformandsnackablecontentisprimarilydrivingthegrowthinconsumptionofdigitalmedia,andisprimarilydrivenbyyoungeraudience.

Consumer preferences

Short form content

► The average length of video viewed in India is 20 minutes

► 62% of content consumed on YouTube is Short Form Content

Mobile driven

► YouTube is accessed by 35% of smartphone users

Low willingness to pay for content

► Of ~100 million digital users, only about 0.5 – 1 million pay for content

Driven by youth

► The 15-24 and 25-34 age categories constitute the 80% of the users

Live TV driven by sports

► 25 million digital views of the India vs Pak World Cup match 2015

► 40 million digital unique viewers for IPL 2013

Curated content/playlists

► “Expert curated playlists are more popular than the albums with about 33% more clicks” : Airtel Wynk

Source: EY Analysis

Digital Media Growth Opportunities in India | 13

Thisevolvingtrendhas led content producerslikeErosInternational & Star to focusonexclusiveandsnackablecontent

DigitalvideoconsumptioninIndiaisprimarilyintheformofshortformcontent.Thisismainlybecauseofslowandfluctuatinginternetspeedswhichhinderthevideoviewingexperience.Lowlevelsof3Gpenetration,elongatedtimetodownloadmovies,bufferingtimeandbandwidthissueshavecausedIndianstoprefershorterandsnackablecontentascomparedtoothercountries.

Singapore52 MN

Japan49 MN

Indonesia42 MN

Taiwan29 MN

India20 MN

Source: Ooyala Video Index

Original snackable content

MostIndianOTTplayerscurrentlyhavesimilarcontentlibrariesofGECTVshows,moviesorregionalcontent.Currently,theydonotoffermuchdifferentiationincontent.However,withincreasingcompetitionandnewentrantsinthemarketthefocusisshiftingtowardscontentdifferentiationbyprovidingoriginalsnackablecontent.

Focus on differentiation through original content

Eros international (leading production house) has announced its plans to invest $25 mn in FY16intobuildingoriginalcontentforitsOTTplatformErosNow.

Spuul,aSingaporebasedindependentOTTplatformtargetedatIndianaudienceanddiaspora is also planning to invest in original content for India.

Focus on differentiation through short form content:

WiththeinclinationoftheIndianaudiencetowardsshortformatcontent,OTTplayersalsoneedtofocuson‘snackable’contentforOTTplatforms.VideonetworkslikeAIBandTVF(runspopularYouTubechannelswhichoffershortsnackableclipsinthecomedygenre)havebeenabletogarnerconsiderablemarkettraction.

Inthisregard,OTTplayerslikeHotstarareinkingdealswithpopularcontentproducers likeAIB.

Network Total Subscribers (MN) Total Views (MN)

AIB 1.2 97

TVF 1.2 114

Source:EYAnalysis


3. Platforms driving digital media consumptionOTT platforms & players

VariedplayerslikeTelecomOperators,ContentAggregators,MediaEntities,DTHPlayers,etc.haveventuredintheOTTspacewithintheIndiaMarket.Theyareleveragingtheirstrengthsinordertoestablishafootholdin themarket.

543

12

OTT Market in India

Devices

MixRadioMusic streaming

subscription service

ClubMusic, movies,

videos & mobile TV

DTH players

DishtvVoD and Short form

content

TATA SkyLive TV, Catch up TV

and VoD

Telecos

Wynk MusicMusic streaming


Vodafone MusicMusic streaming


Content aggregators

Box TVTimes Internet’s video

streaming service

SpuulStreaming and

download of movies, short films & TV shows

Media entities

Sony LIVAd based VOD

service

HotstarAd based VOD service for Star

Thedifferentplayersinthisspacehaveleveragedtheiruniquestrengthsandhencefaceduniquechallenges.

• Devicebasedplayershavepreloadedappsonhandsetsandtargetedexistingusers.However,theyfaceveryhighcontentcostsleadingtosmallandlimitedcontentlibraries

• Telcosprovidebuiltinpaymentsoptionsthroughnetworkbillingandincentivesfordatausage.However,theyalsofaceissuesarounddifferentiatingcontentlibraries

• Media Entitiesareleveragingtheirexistingcontentlibrariesandprovidinganad-basedproduct.Drivingtrafficandengagementisamajorissueforthemalongwithmonetization

• DTH Playersaretargetingtheirexistinguserswithwhite-labelledsolutions.However,theylackpopularcontentandhavefoundfewertakers

• Content Aggregators/Start Ups haveoptedforafreemiummodelprovidinglong-formcontentandtargetingNRIaudiences.However,theirreachislimitedbecauseoflimitedappdiscovery.Increasingcontent costs are also a challenge for these aggregators

ContentaggregatorslikeSpuulandBoxTVwereearlystartersinthisspaceandhavearelativelyestablisheduserbaseanddiversecontentlibraries.


• Spuul,headquarteredinSingapore,isanOTTserviceproviderofferingvideostreaming and download services

• IthascontentofferingsacrossHindi,Tamil,Teluguandotherregionallanguageswhichisavailableacrossweb,mobileandChromecastplatforms

• Currently,ithasacontentlibraryofover1000TVshowsandfilmsfromYashRajFilms,BalajiTelefilms,ShemrooEntertainment,Viacom18,PhantomFilmsandUTVmotionpictures

• ItlargelytargetstheIndianmarketandtheIndiandiasporainSingapore,UAE,USandUKandislookingattelcopartnershipstodriveconsumeracquisition

• Theyoperateonafreemiumrevenuemodelandfocusontransactionrevenuearisingdaily,weeklypacks

• BoxTV,aTimesInternetinitiative,providingOTTserviceofferingon-demandvideostreaming,hasalsobeensetupinSingaporeforoperationalefficiencies

• ItcaterstotheIndiandiasporainIndia,Singapore,UAEandtheUKandUSA

• ContentlibraryincludestitlesfromCelestialEntertainment,DisneyUTVandSonyPicturesTelevisiontoprovideHollywoodcontent;andEverymediaTechnologies,ShemarooEntertainment,RajshriProductsionsandUTVMotionPicturestoprovideIndia-focusedprogramming

• Inaddition,BoxTVofferedlivestreamingofthe2013IndianPremierLeague

Spuul

BoxTV

Growing traction of multi-channel networks (MCNs)

Multi-ChannelNetworksareentitiesthataffiliatewithmultipleYouTubechannelstooffercontentcreatorsassistanceinareassuchasprogramming,funding,cross-promotion,partnermanagement,digitalrightsmanagement,monetization/sales,and/oraudiencedevelopment.

MostMCNsarefocusedaroundaverticalordemographicwithlarge,targetedaudiencesforprogramming,distribution,andsales.

MCNsinIndiaarecurrentlywitnessingalotoftraction,whichhasledtomajorglobalMCNsconsideringanentryinthisspace.Inaddition,alotofM&Ainterestbystrategicplayersandtheinvestorcommunityhasbeenobservedrecently.


TopMCNsinIndiaincludethefollowing:

MCN Genre Total Subscribers (MN)

Total Views (MN)

YoBoHo Kids,Entertainment,Food 3.1 97

One Digital Entertainment

Entertainment,Sport,Music 3.0 70

WhackedoutMedia Entertainment 2.1 51

Nirvana Digital Entertainment,Kids,Music 1.0 47

AppuSeries Kids 0.4 12

PocketFilms Kids 0.07 4

RecentFundingDeals&AcquisitionsintheMCNSpaceinIndia:

• CultureMachineraisedUSD18mn.offundingfromTigerGlobal,ZodiusCapital&TimesInternet

• #fame(earlierFameboxNetworks)raisedUSD10mn.offundingfromTTNVentures

• Ping Digital raised funds from varios angel investors

• FullscreenmakesstrategicalliancewithIndianMCNQyuki

• MakerStudiosisenteringIndianmarketandhasstartedsigninguppopularvideonetworkslikeAIB

Mobile internet driving digital music consumption

DigitalMusicisstillatanascentstagewithverylowlevelsofpenetrationascomparedtootherdevelopingmarkets.However,withthegrowthinmobileinternet,digitalmusicstreamingappsarelikelytogainalotoftraction.

Revenuesfromdigitalmusicservicesareexpectedtogrowatacompoundedrateof16.6%toINR11billionby2018withstreamingmusicaccountingforaround10%ofthemarket,i.e.approximately0.6billion.

5.1 5.5

CAGR: 16.6%

6.37.5

9.0

11.0

2013 2014 2015 2016 2017 2018

Digital music revenues

Source: FICCI Report

DigitalmusicsegmentinIndiaisquitecrowdedwithmostofthemajorstreamingplayersofferingsimilarservices.Theyhavesimilarcontentlibrariesandrevenuesmodels.Ontheotherhand,internetradiohasalimitednicheaudienceandisprimarilydrivenbygenrebasedcontentlikeCarnaticmusic,classisrock,etc.Itmainlycaterstospecialinterestbasedgroupsand to enthusiasts.

Thisspacehasseeninvestor interest in the recent past and internationalplayerslookingatanIndiaentrycouldconsiderpartnering or investing in Indian platforms.


4. Increasing demand for regional / vernacular contentThenextwaveofgrowthinIndianinternetisexpectedfromnon-metroandruralareas,wherewirelessmobileinternetshallplayapivotalrole.Vernacularandregionallanguagetrafficissettogrow,exhibiting59%usergrowthand56%sitetrafficgrowthin2013.

Internet user base

130

280

60

270

2014 2018

Urban Rural

Source: IAMAI

Figures in millions

Unlocking the potential

Thegrowthhasbeenfuelledbyavailabilityoflow-costsmartphones,fallingratesofdataplans,increasedadoptionandawarenessinruralIndia.Afewkeyelementsthatcanfurtherhelpunlockthetruepotential wouldbe:• Providingaffordabledatapacksandaccessthroughthenetworkreachwithdataenableddevices• Facilitatingdigitaltransactionsandeaseofpayments,potentiallythroughnewinstruments• Developingaregulatoryframeworkwhichwouldencouragecontentdevelopment,protectartistsagainst

piracy,etc.• Enablingentrepreneurialventuresthrougheaseoffinancingandmentorshipprograms• Creationofregionallanguagecontenttotapthepotentialofnon-urbanareas

Shift of consumer base

Theshiftisalreadybeingwitnessedbyvariousplayersacrosstheentiredigitaleco-systemfrome-commerceplayerstopaymentwalletsandportalswithmorethan40percentofPayTMusersarefromtier-IIand tier-IIItowns.

Regional news

Regionalnewsconsumptionisontherise,withsignificanttrafficcomingfromruralandsemi-urbanregions.Thishasgivenbirthtoseveraldigitalplayersfocusedonkeyregionalandvernacularmarkets..Thishasgivenbirthtoseveraldigitalplayersfocusedonkeyregionalandvernacularmarkets.

Digital players growing in key regional markets

Newshunt Oneindia Vikatan

► 16 bn page view every month ► Half of its user base from Tier 2 and 3 cities like Pilani, Haridwar, Mathura etc.

► 1.5 lakh UBs every day & 200 million page views every month

Source: EY analysis


Vernacular video content

ThepreferenceoftheIndianconsumerstowardsvernacularandregionallanguagecontent isconstantlyontheupswing,with93%ofthetimespentonvideosinHindiandotherregional languages.

Content consumption (time spent)

English, 7%

Hindi, 63%

Other regionallanguages, 30%

Source: Google Report: Online opportunities in Telecom

Digital content producers can thus lookataggregating/producing vernacular content to capture the nextsetofusers.

5. Specific content for focused TGThefaceofnewdigitalIndiawillbefarmorediverseinthetimestocomeandisexpectedtorapidlymoveawayfromtheold,familiarfigureofanurban,mid-aged,upper-middleclassmale.Thereisapredominantshifttowardsusingmobilephoneasaprimaryandoftenonlyaccesspointtotheinternet.Thepreferredserviceswillmatchday-to-daydemandsofadiverseincomehousehold,regionallanguagebasedandmoreoftenoutsideatierIcityandfrom tier II & III cities.

2003 2018

Older • 60%undertheageof25 • 54%overtheageof25

Rural • 29%ruralaudience • 40%-50%rural,semi-urbanaudience

Genderbalanced • 2.6menforeverywoman • 1.9menforeverywomanamong18-24yearolds

Mobile • 60%-70%oftheuserbase

• 70%-80%oftheuserbase

Vernacular • 45%oftheusersconsumeregionallanguagebasedcontent

• 70%-90%IndiandonotspeakEnglish,lessthan1%asaprimarylanguage

Source:IAMAI


Asthedigitalaudienceisshiftingfromthefamiliarpersona,therewillemergeanopportunitytocreateTGspecificcontentforthenewaudience.Thereexistemergingcontentproducersfor genre centric content. Children & women centric content has gained interest in the recent pastandmanyplayersarecurrentlylookingtocreatecontentinthisgenre

Womencentriccontent:MissMalini.comproducesBollywood,fashion&lifestylecentriccontentspecificallyforwomen.Pingdigital,anupcomingMCN,runsmultiplewomencentricchannels.

Childrencentriccontent:MultipleMCNsincludingYoBoHo,Appuseries&ChuChuTVhaveemergedinthisspace.Thesegmenthasalsoseeninvestorinterest:RTLGroupownedCanadianmediacompanyBroadbandTVacquiredYoBoHo.

YoBoHo’s Ecosystem around Kids Content

ChuChu TV’s Ecosystem around Kids Content

Appu Series Ecosystem around Kids Content

YOBOHO CHUCHU TV APPU SERIES

► YoBoHo owns and operates 27 kids centric channels

► The prominent one is : HooplaKidz

► Chu Chu TV owns and operates 5 kids centric channels

► The prominent one is : Super Simple Songs

► Appu Series owns and operates 17 kids centric channels

YouTube Channels YouTube Channels YouTube Channels

► YoBoHo generates 3 billion views per year

► One of the largest pre school & educational networks on YouTube

► ChuCHu TV generates 2 billion views per year

► ~ 2 million subscribers on YouTube

► Appu Series generates 541 million views per year

Online views Online views Online views

► 8000+ videos of Kids centric content

► Content featuring original programming is produced in house

► 1122 + videos of Kids centric content

► ~7800+ videos of Kids centric content

► Content featuring original programming is produced in house

Library of Content Library of Content Library of Content

Source: EY analysis

Case study: popular kids centric players

With the changing demography&psychographyofthedigitalaudience,thereisanopportunitytobuildTGcentriccontent


Section II: Enabling opportunities for the growth of digital media players


1. Consumer aggregationWithincreaseindigitalconsumption,IndiaandotherAsianmarketsareexpectedtohelpmediaconglomeratesto drive consumer aggregation.

Around80%ofdigitalconsumersinSoutheastAsiaownasmartphoneandhalfofdigitally-engagedhouseholdsintheregionownatablet.Thispenetrationofconnecteddevices,especiallysmartphonesandtablets,isinstrumentalinmediaconsumptionshiftingbeyondtraditionalmediaformatssuchasbroadcastandcableTVtowards digital mediums.

SoutheastAsiannetizensspend,onanaverage,over22hoursonlineperweek,upfromapproximately19hoursperweekin2011.Alongwithincreasingconnecteddeviceownershipandtimespentonline,consumers’mediaconsumptionhabitsareshifting

Growing base of Indian internet users

Whilein2001,Indiahadapproximately7millioninternetusersonly,overthelast14years,thisnumberhasgrownover30timesatacompoundedrateofover40%Y-o-Y.Today,Indiaisonitswaytobreachthe300millioninternetusermark,makingitthesecondlargestuserbaseintheworldbehindChina.

Whileittookover20yearssincetheintroductionofinternetinIndiatoreach100millionusers,thesecond100millionuserswereaddedinapproximately3yearsonly.Goingforward,thethird100millioninternetusersarelikelytobereachedinlessthanayear.

Internet population growth (2013-2016 in million)

617

246 265167

700

2X growth 320

China

Source: eMarketer research

USA India

2013 2016


Growth & penetration of smart devices

IndiahasskippedthewidespreadPCinternetusagephaseandhasdirectlycometothemobilephase.ThenumberofsmartphonesinIndiagrew54%during2014,reaching140millionandisexpectedtocontinuetogrowatafastpace.Thenumberoftabletsalsogrew1.7timesduring2014,reaching2millionandisexpectedtocontinuetogrowatafasterrateevencomparedtosmartphones.Indiaisexpectedtohaveover18milliontabletusers by2019.

Close to the inflection point

Bothintermsofconsumerandadvertiserinterest,theIndianInternetecosystemisclosetothepointofinflectionthatwasobservedintheUSmarketin2007-08periodwhenthesmartphonesand4G/LTEgainedtraction.

Device penetration In India (mn) Smartphone Penetration In India

176 202

2013 14%

2014e 21%

2015e 33%

2016e 48%

2017e 66%

55

354 Year Smartphone penetration

20

131

2013

Smart phones

2014e 2015e 2016e 2017e

TV sets Tablets

Source: EY Future of TV report

IndiahasbecomethesecondlargestmarketforsocialnetworkinggiantslikeFacebook&LinkedinacrosstheworldandisexpectedtosurpasstheUSAtoleadtheglobaltallyofthelargestFacebookuserbaseonMobileby2017.


2. Introduction of 4G and increased penetration of high-speed broadband servicesThenextwaveofgrowthinIndianinternetisexpectedfromnon-metroandruralareas,wherewirelessmobileinternetshallplayapivotalrole.

2Gcontinuestobedominantinnon-urbanregions,telecomoperatorsareinvestingheavilyonhighspeedtechnologieslike3Gand4G(LTE)tocatertothedemandofurbanIndia.

Eventhoughthemajorproportionofwirelessinternetsubscribersare2Gusers,theadoptionof3Gisgraduallyincreasingandnowconstitutesabout36%oftheoverallwirelessinternetuserbase.4G(LTE)isalsobeginningtosetitsfootinthemarketwithAirtelbeingthefirstoperatortolaunchitsservices.DigitalIndiaInitiativesbythegovernmentareexpectedtobeinstrumentalindrivingthedemandfor4G.TheGovernmenthasindicatedinvestmenttothetuneofINR70bnfortherolloutof4GacrossIndiaoverthenext3years.Inadditiontothepublicsectors,RelianceJiohasalsoinvestedINR700bncroresforallocationof4Gspectrumwheretheirnetworkwouldencompass600,000villagesinIndia.

Withthisgrowth,thereisopportunityforincreased consumption ofhighbandwidthservices including video and other interactive services

Total internet subscribers

Wireless broadband internet subscribers

Penetration of Internet in India - 19%

254.50 million

Total broadband subscribers

Internet subscriber base in India (as of May 2015)

Wired broadband internet subscribers

104.96 million

89.40 million

15.56 million

Source: TRAI

4G growth and market share

4G market in India (in millions) 4G mobile data traffic in India

15

50

2015

Source: Forrester Research, CISCO

2018

>3X Growth

0.50%

36.90%

2013 2018

India will see a significant spurt in 4G Wi-Fi hotspots driven by Government and private sector initiatives


3. Growth of payment walletsMostofthepaymentsinIndiaarestillcashbasedwithapproximately95%ofthetotaldebitcardusagefocusedonATMbasedtransactions.However,thisisexpectedtochangewithrapiddevelopmentsinthemobilepaymentinfrastructure.

Thegrowthofe-commercesaleshasbeenacatalystforgrowthinmobilepaymentinIndia.Approximately41%ofsalesfromIndiane-commerceareexpectedtoaccruefrommobilepaymentsinthefuture.

Thepre-paidrechargepaymentmarketisexpectedtobethefastestareaofgrowth(~40%)formobilepayments,followedbydomesticremittances.Amajorityofthemobilerechargemarketisdrivenbymobilewalletcompanies.

Thee-commerceandpaymentsecosystemsaremovingclosertogetherwithrecentstrategicactivityinthespace–Investorsseestrongsimilaritiesandareexpectedtoadoptcomplementarystrategiesinthetwospaces.

Current market landscape

Overall,themajorIndianpaymentwalletplayershaveraisedcapitalforinvestmentsintechnology/dataanalytics,brandbuildingandgrowingthenetworkofusersandmerchants.PayTMgrewat17xoverthelastyeartoreach50mnusers,whereasMobiKwikhas around 17 mn users.

Thebiggestplayers–PayTMandMobiKwikarelookingtogetintothebrick-and-mortarretailingmerchantstoexpandtheiruserbaseandpaymentvolumes.

Semi-Urbanandruralregionsareexpectedtofuelthegrowthofmobilewalletpaymentplayers,wheremorethan40%ofPayTMusersarefromTierIIandTierIIItownsandisexpectedtocrossover100mnusersby2016.

Different entities in themobile/onlineecosystemarebuildingdifferentmobilecentricwallets to overcome paymentissuesdueto low credit card penetration and other factors.

Growth: 14.0x Domestic remittance, 26%

Others, 10%

Utility bills, 34%

Prepaid mobilebills, 30%

14.320

Dec ‘13 Dec ‘14

India: All online payments (USD Bn)

Mobile payments (USD Bn)

Mobile payments: By payment type 2014

0.1

1.4

FY12 FY15

Source: RBI, IAMAI


4. PartnershipsTheDigitalMarketinthefuturewillevolvetohavemoredigitalsupplychainpartnershipstobringincomplementarypropositionssuitingtheirstrengthsinthemarket.Withthisevolution,internationalmediaplayers,especiallyplayersintheSouthEastAsia,haveshowninterestintheIndianmarketthroughinvestmentsandpartnershipsinthemarket.Variousinvestorshaveshowninterestinthemarketandarebuildingportfoliostoleveragethemarketstrength.

OTT market partnerships:

TheOTTspaceinIndiacurrentlyhasplayersfromacrossthemediaecosystemincludingbroadcasters,studios,DTHoperators,telcos,andcontentaggregators.Theseplayerscanbebroadlysplitin3types:Contentowners(broadcasters&studios),Pipe/paymentchannelowners(DTH/Telcos)andStart-ups(contentaggregators).

Theplayersarecurrentlyfocusedonestablishingafootholdinthemarketbasedontheirindividualstrength.Fore.g.Contentowners,specifically,inrecenttimeshaveshownincreasinginterestinthisspace-Viacomhasannouncedthelaunchofadigitalvideoservice;StarhaslaunchedtheirOTTservice,Hotstar,earlyin2015whichhasseensignificantmarkettraction.

Contentownersareleveragingtheirstrengthandareprovidingitexclusivelyontheirplatform(StarhasremovedallofitscontentfromallotherplatformsincludingYouTubetomaintainexclusivityofitscontentonHotstar,SonyandEROSareofferingexclusivepremiersofmoviesontheirOTTportals).

However,theOTTplayersarefacingmonetizationchallengesasadvertisementrevenuesdonotprovideenoughtocoverforcontent&customeracquisitioncosts.Inthelongtermtheseplayerswillhavetogarnersignificantrevenuesfromthesubscriptionservices.Thelowpenetrationincreditanddebitcardsinthecountryactsasaconstraintfortheadoptionofsubscriptionservices,thusmakingitessentialtoprovideoperatorbilling/paymentwalletoptionsforinternetservices.Telcoscurrentlycharge30%-45%ofrevenueearnedthroughoperatorbillingastransactionfees,whichactsasadeterringfactorforOTTproviderstointegrateoperatingbilling.

Partnershipsacrossthevaluechainofmediaservicescouldresultinmutuallybeneficialrelationshipsbringdownboththecontent&thetransactioncosts(i.e.broadcasters&studiospartneringwithTelcos&DTHproviders):

Case study: HOOQ - the first of many studio, telco partnerships

WarnerBrothers

Current presencePhilippines India Thailand

Expansion plansChina Korea Japan

Content deals

► YashRaj Films► Disney UTV► Reliance Pictures

► Shemaroo ► Rajshri► Whacked Out Media

SonyPictures

HOOQ

Strategy implemented

SingtelGroup

Warner Bros. will bring forward its world class content library of movies and TV programmes

The Singtel Group provides market access with its customer base of over half a billion mobile customers and its billing capabilities

Sony Pictures Television will bring forward its extensive library of movies and TV programmes

Pan- Asian planned service to cater to the Asian audience to counter Netflix’s entry in the South-east Asian Market

Offer localized content with a selection of Indian, Chinese, Thai, Filipino, Indonesian, Korean and Japanese movies and TV series

Capitalizing on synergies attained through the tie-up to gain exclusive content deals on a subscription only model

Hooq would also offer exclusive content and other features such as offline play, multiple device access


Partnerships with global players

ManyglobalandSoutheastAsianplayershaveshowninterestinhavingIndianofferingstocapturethenextphaseofdigitalgrowthinthecountry.Theseplayersarelookingatofferingsthroughregionalpartnersandwanttoprovide‘Glocal’offerings.

Case study: Lionsgate & Alibaba: global media player partnering with a local major

Case study: Times Global PartnersTimesGlobalPartners(TGP)isaninnovativeinitiativefocusedonTimesInternetpartneringwithestablishedandemergingglobaldigitalcompaniesforgrowingtheirpresenceandbusinessinIndiathroughgrowthoftheirbrand,audience,adoption,distributionandmonetization.

Lions Gate Entertainment World

The collaboration would lead to Lions Gate’s expansion into the Chinese market and would have content offerings such as “Twilight” films, “The Hunger Games: Catching Fire,” “Divergent” and

The content would be distributed through Alibaba’s latest generation of set-top boxes which would facilitate reach

Lions Gate Entertainment World plans to engage customers in China by offering premium content and subscriber benefits such as invitations to screenings, behind-the-scenes exclusives, etc

To facilitate further synergies, Alibaba group is also been in talks to gain control of Lions Gate by acquiring a 37 percent stake in studio

Alibaba GroupAlibaba Group, present across the internet and ecommerce space would provide the distribution and market knowledge in this deal

Lions Gate EntertainmentLions Gate Entertainment would provide its content which includes a large library of movies and TV programmes Tie up

Current partnerships

UBER Lifehacker Gizmodo Business Insider Dorkly

Askmen Pursuitist Techradar The Huffington Post College Humor

With increasing competition and challenges around monetization,dplayersareincreasinglylookingat partnerships in order tomitigatemarketconstraints.ManyglobalplayerswhoareenteringintotheAsian/Indianmarketarelookingatlocal partnerships in ordertoprovide‘Glocal’Offerings.Themarketisexpectedtowitnessmore vertical and horizontalpartnerships,acquisitions to drive synergies.


Case study: Malaysian media house - AstroAstro,amajorMalaysianmediahousehasdemonstratedsignificantinterestinmediaentitiesandhasrecentlymadesignificantinvestmentsindigitalmedia.

Astro Digital Investments in India

Company Overview Investment/Deal Value

GetitInfomedia Pvt. Ltd.

Getitisadirectionalmediacompanyandhasservicesacrossmarketplace,classifiedsandmedia

Acquired50%stakeinGETITInfoservices for $22 million

Mogae Digital Private Limited

Mogae is engaged in internet mediabusinessandisanoperatorofsocialnetworkingportal

Acquired50%stakeinMogaeDigital Private Limited for $5 million

TTNVentures TTNVentureshasfourbusinessunits-IgniteeDigital,aMumbai-baseddigitalmarketingservicesfirm;IntelliGrapeSoftware,aDelhi-basedwebandmobileappdeveloper;TangerineDigital,acontent management firm;andTechsailor,adigitalmarketingagencyinSingapore and China

AstroisamajorinvestorinTTN.TTNVentureshasfurtherinvestedinAmericanSwan(fashionandlifestylee-commercebrand),#fame(talent management platform)Blogmint(platformconnectingbloggerswithbrands)andThoughtBuzz(socialmediaanalyticsbrand)

Askme,aproductofGetitinfomedia(backedbyAstro),provideslocallistingandsearchserviceswithinIndia.Ithasrecentlylauncheditslocalsearchlistingplatform‘findit’inMalayasia.ThroughthisitisalsotryingtoleverageAstro’sstrengthinMalaysiaandestablishafootholdinthemarket.


ConclusionThe role of digital media in India’s growth story

AsdevelopmentsintechnologycontinuetoenablecontentandentertainmenttoreachallofIndia’slargepopulation,theroleofdigitalmediainIndia’sgrowthstorycannotbeunderplayed.India’sgrowingmiddleclass,risingdisposableincomes,highvolumeofcontentconsumptionandfavourableregulatoryenvironmentaredrivingtheDigitalMediaIndustryandhelpingitflourishinIndia.

Withtheincreasingfootprintofdigitalusersandcontentadoption,amajorboostshallbeexperiencedbythedigitalmediasector,attractingforeigninvestmentsandcapital,thuscontributingtotheoverallgrowthoftheIndianEconomy.

Government initiatives for Digital India

VariousinitiativesandannouncementsbytheGovernmentofIndiahaveenabledthesectortoflourish.Inrecentyears,theGovernmenthasrelaxedentryregulationsandrestrictionsgoverningforeigncompaniesinIndia,providingaconduciveenvironmentandencouragingglobalmediacompaniestosetupitsfootprintinIndia.

Theambitious‘DigitalIndia’projecthasatotaloverlayofoverINR1trillioninthenext3yearsandaimstotransformthecountryintoaknowledgeeconomy.AmongthemultipleprojectsthatcomeundertheDigitalIndiainitiative,thenationalbroadbandplanwillcostthemostwithaplantoconnect250,000villagecouncilsatacostofINR27,000crores,tobecompletedbyDecember2016.

4G and increased penetration

Digitaladoption,atatippingpointduetowirelessbroadbandavailability,willcreateadditionalopportunitiesforglobalcompaniestocatertoanewgenerationofdigitalconsumers.

Indiaiscurrentlywitnessingamassivesurgeinwirelessbroadbandadoptionleapfroggingwirelinebroadbandtechnologies,whichwaspivotaltothemassadoptionoftheinternetinothercountries.Theincreasingadoption


of3Gusers,constitutingtoabout36%oftheoverallwirelessinternetuserbase,allowsIndianmobilephonesubscriberstoaccessbroadbandatsubstantiallylesscostandinvestmentthanfixed-linebroadband.Moreover,therolloutofmass-market4Gserviceswillfurtherincreaseandbolstertheavailabilityofwirelessbroadbandservices.

TheGovernmenthasindicatedinvestmenttothetuneofINR7,000croresfortherolloutof4GacrossIndiaoverthenext3years.Inadditiontothepublicsectors,RelianceJiohasalsoinvestedaroundINR70,000croresforallocationof4Gspectrum.

Partnership opportunities for global & Southeast Asian players

Asglobalmediacompaniesstarttocompeteforgrowthopportunitiesworldwide,thereisanincreasingsenseofurgencytocapturetheopportunitiesofferedbytheIndianmarket.InordertosucceedinIndia,itisnecessaryfor companies to understand and adapt to economic and cultural nuances and invest in content and services tailoredforthelocalmarket.Globalcompaniesneedtothoroughlyassessthemarketanddistributionchannelstopricecontentappropriatelyandadoptdifferentstrategiestoservetheseveralinternalmarketsthatexistinthecountry.

Increasing interest from the investment community

TheDigitalMediaIndustryinIndiahasbeen,andshallcontinuetobe,oneofthebiggestbeneficiariesofIndia’sfavourabledemographics.Beingoneoftheyoungestnationsintheworld,withhighvolumesofcontentconsumption,avibrantindigenouscontentcreationindustryandafavourableregulatoryframework,makesIndiaanattractiveinvestmentdestinationforglobalandSoutheastAsianmediacompanies.

Indiawitnessedaphenomenalnumberofover1,500dealsvaluedatapproximatelyUSD14.5billion,primarilydrivenbyPE/VCinvestmentsinthedigitalspace.


GlossaryofkeytermsTerm Definition

AIB AllIndiaBakchod

CAGR CompoundAnnualGrowthRate

DTH Direct-To-Home

FICCI FederationofIndianChambersofCommerceandIndustry

GEC GeneralEntertainmentChannel

IAMAI Internet&MobileAssociationofIndia

INR IndianRupee

LTE Long-TermEvolution

M&A Mergers&Acquisitions

M&E Media & Entertainment

MCN MultiChannelNetwork

OTT Over-The-Top

p.a. PerAnnum

PVs PageViews

SoutheastAsia Singapore,Vietnam,Malaysia,Thailand,PhilippinesandIndonesia

Telcos TelecomOperators

TRAI TelecomRegulatoryAuthorityofIndia

TVF TheViralFever

UVs UniqueVisitors

VoD Video-on-Demand

Y-o-Y Year-on-Year

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Established in November of 2010 by a Joint Declaration between the City of Los Angeles and the Indian Film Industry, the LA India Film Council was formed to facilitate and strengthen motion picture production, distribution, technology, content protection, and commercial cooperation between the above two communities.

The Governing Council is an amalgamation of a prestigious panel of members from India and the U.S. This body collectively strives towards creating a support system that facilitates motion picture production, distribution, technology, content production, content protection and commercial cooperation between Hollywood and Bollywood. The current Governing council members are: Film Federation Of India, Film and Television Producers Guild of India, National Film Development Corporation, Federation of Indian Chambers of Commerce and Industry, AP Film Chambers, California Film Commission, LA Mayor’s Office, MovieLabs, Technicolor India, DQ Entertainment, Reliance MediaWorks, Prime Focus, Peter Law Group, Whistling Woods International, Film and Television Institute of India, University of Southern California- School of Cinematic Arts and Motion Picture Dist. Association (India) Pvt. Ltd., UCLA School of Theater, Film and Television. www.mpaa-india.org (http://www.mpaa-india.org)

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Digital Media Growth Opportunities in India · operators etc. are building various platforms to capture the growth in video and music streaming services. These players are trying