What's the online video war worth?

Video-on-demand players are willing to go to war over digital rights. A look at the kind of content that's fuelling the fight and the stakes involved.

As the online video fire spreads across the digital jungle, players compete for the best possible content and fattest possible subscriber base. As these buyers, particularly subscription-based video-on-demand, or S-VOD - players fight it out for the best content, acquisition costs for the same are going up. What is making buyers willing to bet big? What's making the fight for digital video content attractive?

Content acquisition cost is not rising uniformly across genres and is almost entirely contingent upon the type of content - sports (acquired from licensing authorities), movies, and international TV series (acquired from studios). Where is the money going and what does the arc look like?

BRIGHT LIGHTS

The ecosystem comprises different players trying out different strategies. The four major broadcasters - Star, Zee, Sony, and Viacom18 - have a substantial presence. Global giants Netflix and Amazon have announced their plans. Experts are keeping an eye on Reliance Jio's Jio-on-Demand.

Vidya Nath, director, digital media, Frost & Sullivan, a research and consulting firm, says, "There are 66 million unique connected video viewers in India, of which 1.3 million are paid video subscribers. Online video subscription numbers fluctuate dramatically every month. A large percentage of video-on-demand viewership in India is fragmented across states and languages."

According to Frost & Sullivan's projections, the number of unique online video viewers will grow from 66 million in 2015 to 355 million in 2020. According to its estimate for S-VOD, the 2 million subscribers (2016 figures) will grow to 5.7 million in 2020. Experts also predict a growth in regional content on these platforms, fuelled by demand from both local viewers and the international Diaspora.

SPORTING TOUCH

Star India's digital platform Hotstar had a hot start ignited by the ICC Cricket World Cup 2015. It was played in Australia and New Zealand, which meant a typically odd timing for the affluent Indian working class. Hotstar, which streamed the matches live, emerged as a good alternative for office goers.

Uday Sodhi, executive vice-president and head, digital business, Sony Pictures Networks India (SPNI) points out that the European Cup (Football) was a success for Sony LIV as the platform got a huge number of unique or first time viewers on it. "We roped in 20-25 million users on the platform during the Cup," he says, adding, "Experiential marketing is an important facet and a marquee sports property helps you do that. It gets a lot of viewers who will stick around if you have relevant content."

The streaming rights of the annual, cash-rich T-20 tourney Indian Premier League are with Hotstar till 2017. Hotstar acquired the rights for three years in 2015. The online video platform paid a premium of Rs 302 crore to acquire the streaming rights. Before that, it was with Times Internet, acquired for Rs 264 crore for four years.

The Board of Control for Cricket in India (BCCI) has already issued an invitation to tender for the digital rights of the multi-million dollar tournament, and Reliance Jio, Amazon, Star, and Sony are in the race. The rights will be sold for a five-year period at an estimated amount of over Rs 500 crore.

HOME THEATRE

Amazon Prime's recent deal with Dharma Productions signifies that the international player, too, feels that movies are a great way to earn subscribers. The platform, say sources, has paid Rs 30-35 crore to seal the licensing deal. Dharma Productions will provide Amazon with select blockbuster titles including 'Ae Dil Hai Mushkil' and other forthcoming titles such as 'Ok Jaanu' and 'Badrinath Ki Dulhania'. A few weeks ago, Amazon signed a deal with Vishesh Films, giving it access to the latter's catalogue of movies, comprising nearly 50 titles.

Amrita Pandey, vice-president, studios, Disney India, concurs, "A few rich deals are happening in the market as many high profile S-VOD players are launching, but it will be important for the players to get a good, growing paid subscriber base for this revenue to be sustainable."

Today, an Indian studio generates 70 per cent of its revenue from box office collections, while 15 per cent comes from satellite rights. Ten per cent consists of digital rights, brand integration, airline rights, music rights and others. The revenue from digital rights is close to 7-10 per cent of the gross collection. This figure can go up to 30 per cent in a year, predict experts, given the growing competition among S-VOD players.

Blockbuster movies have seen a 15-20 per cent surge in the last one year when it comes to digital acquisition cost. Ajit Andhare, chief operating officer, Viacom18, says, "The digital acquisition cost can surpass satellite cost in the near future as the bandwidth issue settles down and the S-VOD platforms grow their subscriber numbers."

Sodhi, however, finds it difficult to believe that the digital acquisition cost can surpass satellite cost in the near future. "I don't see that happening," says he. But, he agrees to the fact that movies play a vital role when it comes to online video players. "Movies keep the viewer on the platform for a long period of time... it enhances the time spent. Also, if you have an exhaustive library you will have the viewer coming back to the platform again and again. You may have same viewer tuning in many times to watch the same movie again and again. So, unlike sports, movies are more sustainable and have a longer life," Sodhi adds.

SERIAL MADNESS

It was the premier of the English series Game Of Thrones (GOT) for which Hotstar introduced a pay wall. The series has a huge number of loyal fans who have been following it season after season. Traditionally, the US-based series was first premiered on US TV and then after a substantial delay it was aired on Indian TV. This phenomenon made the pirated platform 'Torrent' the go-to place for those fans. The phenomenon has now changed in India as video-on-demand players are thriving on simulcasts and GOT is one of them.

The demand for English shows on online video platforms has already started creating an impact in the English entertainment business. Previously, there was a 'hold back', wherein the studio would hold the S-VOD rights of a show acquired by the broadcaster for a certain period of time. Now, the studios are negotiating these 'hold backs'.

"India is a paradise for studios and their agencies... there are astronomical deals happening in the country. The digital acquisition cost of an English series used to be 15-20 per cent of the satellite rights. In the last one year, the number has swelled to 30 per cent of the satellite rights and in the next one year, it could reach 40 per cent," says a stakeholder on the condition of anonymity. Interestingly, despite the skew, satellite costs are not going down, but have, in fact, increased by at least 15 per cent year-on-year.

The hefty acquisition cost of a series is worth it, according to Sodhi. "In the current scenario, TV shows (as opposed to sports and movies) have the best return on investment," he says. How so? It is the "linearity of a show which gives it an upper hand when it comes to RoI," he explains.

NO BUFFERING

Studios have made it clear that they won't give content for exploitation to A-VOD or advertising-driven video-on-demand platforms (that run on webseries). Acquisition costs for content on S-VOD platforms are rising. It remains to be seen how the players fight it out amongst themselves to make a mark.

Overall, an industry filled with players with deep pockets in the phase of strategic and long-term investment will certainly not count what they spend. So, if you have a great content library and you are not trapped with an already signed long-term content, you are pretty much in digital El Dorado.