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How the OTT landscape is evolving across the globe

Across the globe, the streaming video landscape is being chiselled by the largest global players from the US. Their services are leading to a perceptible shift among TV audiences; more and more are migrating toward consuming OTT content. Yet, audiences from different geographies are consuming content differently. In India, more consumers watch content over AVoD than SVoD. In Southeast Asia, AVoD reigns and local streamers, with knowledge of local preferences and markets, are holding their own against the likes of Netflix and Disney.

Howver, in the US, the market may be nearing subscriber fatigue.

The Indian OTT audience universe is currently at 353.2 million. This translates into a penetration of 25.3 percent, one in four Indians watches online videos at least once a month. There are currently 96 million active paid-OTT subscriptions in India, across 40.7 million paying (SVOD) audiences, i.e., an average of 2.4 subscriptions per paying-audience member. Sixty-six percent of these paid subscriptions are with male audiences. The top six metros contribute only 11 percent to India’s OTT universe, but 35 percent to total paid subscriptions in India. Bengaluru, Delhi, and Mumbai are the top three cities in this regard, with more than 8 million active paid subscriptions each. OTT is no longer a niche category, but at 25-percent penetration, there is still a huge potential to grow the market, especially outside the top cities.

In terms of revenues, the Indian OTT market generated revenues of USD 1.4 billion in 2020. Of this, advertising contributed 64 percent, while paid subscriptions contributed 36 percent. There are 60 OTT platforms in India, the top five, YouTube, Disney+ Hotstar, Netflix, Amazon Prime, and Facebook accounting for 85 percent of the Indian OTT market’s revenues.

The online video market is expected to grow at a CAGR of 26 percent till 2025, by which time its size will be USD 4.5 billion. The subscription-based SVoD market is expected to reach USD 1.9 billion by 2025, a CAGR of 30 percent over 2020. The AVoD market, growing at a CAGR of 24 percent, is expected to reach USD 2.6 billion by 2025.

YouTube remains the AVoD market leader in India. Its share of the online video advertising market is 67 percent of India’s total online video advertising market. However, by 2025, YouTube’s share is expected to decline to 55 percent due to competition from domestic broadcaster-backed platforms and short-form UGC video players. Broadcaster-backed platforms are expected to gain share by streaming local premium content and by acquiring sports rights while short-form video platforms are expected to improve monetization by increasing their reach and engagement with rural millennials.

While India clearly prefers to watch free content over AVoD, in the US the SVoD landscape has matured and various players are jostling for market share. In the third quarter of 2021, the 25 leading subscription apps in the US were downloaded 72.4 million times, a growth of 19 percent year-over-year (YoY). The industry has been on a sustained growth path over the last two years with the launch of Disney+ in 2019 and fuelled later by the introduction of Peacock and Discovery+. The year 2021, year to date, has been the strongest for US subscription streaming app downloads which stood at 216 million, an increase of 29 percent YoY.

Measured by new users, HBO Max has grown dramatically. The company’s growth has been propelled because of same-day theatrical releases on its app. Netflix and Disney+ have lost market share to HBO Max, Peacock, and Discovery+. However, Netflix is still the market leader in the US, followed by HBO Max, which has risen rapidly three places over the last month to surpass Disney+, Hulu, and Amazon Prime.

In the US, the fastest-growing streaming apps were HBO Max, iQIYI, Paramount+, Epix NOW, and Plex.

For the time being, the SVoD market in the US is thriving; however, it may be reaching a saturation point in that country. While the industry is still growing in the US, it is doing so at a decelerating pace. To continue growing, SVoD players in the US are attracting international audiences.

In the third quarter of 2021, Netflix added 4.38 million paid subscribers taking the company’s worldwide total to 213.6 million. However, less than a million of the 4.38 million new paid subscribers Netflix added came from the US. Squid Game’s success demonstrates that Netflix, like other US based streaming companies, is diversifying its strategy to cater to an international audience. To reach global audiences, Netflix is experimenting with its distribution model in India and elsewhere. It offered a mobile-only option in India, a first for the company. Amazon Prime did the same in early 2021. And in Netflix’s 3QFY22 letter to shareholders, the company highlighted the launch of a free plan for mobile users in Kenya. Disney is also experimenting with its distribution model to capture the global market. Much of Disney’s product experimentation is taking place in Southeast Asia.

The efforts of leading SVoD players to capture a larger share of the global audience hints that the US market has reached subscription fatigue. The numbers suggest this. In the US, the number of online video services used per online video user fell from an industry high 7.2 in November 2020 to 7.06 in April 2021. At the same time, markets like the UK, Brazil, and Japan are trending upwards. However, it would be premature to conclude that the US is done as a market for growth. For instance, the number of online video subscriptions per household had increased narrowly from 3.08 in November 2020 to 3.16 in April 2021, reaching 80-percent household penetration. Also, in 2Q2021, consumer spending on subscription streaming increased by nearly 17 percent to USD 6.3 billion. And, for the first half of 2021, it increased by 21 percent to USD 12.2 billion.

So, while the US isn’t done, it is delivering diminishing returns, which is prompting major media players to diversify their approach to attract international audiences.

A key battleground for OTT players is Southeast Asia. The Southeast Asia region has a population of 676 million and, by 2025, its total online video market’s revenues will stand at USD 4.5 billion, the same as India’s by that year.

Local streamers are pitted against global heavyweights in Southeast Asia. Also, Southeast Asia is the only market where Netflix, Disney, and Warner Media are taking on Chinese streamers like iQiyi and Tencent’s iflix and WeTV.

Streaming services, such as Viu and Indonesia’s Vidio, having established themselves in the region relatively early, have carved out substantial market share. In terms of subscribers, Viu is second only to Disney+ in the region, and the leading player in Thailand. While Vidio only operates in its home market of Indonesia, it is neck-and-neck there with Disney+ and Viu. Taiwan’s Catchplay, which is also a theatrical distributor, is much smaller but has launched its Catchplay+ streaming service across Taiwan, Singapore, and Indonesia and is also making an aggressive play in local-language series production.

Local players have a competitive advantage because they know the local audience’s pay and consumption patterns, and because they have exiting relationships with service providers, regulators, and brands. However, when it comes to content, they have yet to find the right balance between cost and return.

The right business model for the region is a combination of advertising-supported and subscription services, known as freemium. Like in India, spending power is still relatively low and piracy high in many parts of Southeast Asia, which makes a pure SVOD play a more complicated proposition than in more affluent markets.

Netflix and Amazon have both launched cheaper mobile-only SVOD plans in several developing markets across Southeast Asia. Chinese streamers, which are relatively new to Southeast Asia, are focusing on freemium and gaining headway in Malaysia, Thailand, and the Philippines. Those global players, who are still sitting on the side lines, are watching with interest to see which model survives.

So far, the local streamers that appear to be thriving are those that are trying to grow both the advertising and subscription tiers simultaneously. Indonesia’s Vidio started out as an AVOD service but launched a paid tier last year, Vidio Premier, which already ranks third in terms of subscribers behind Disney+ Hotstar and Viu.

Local streamers from Southeast Asia are aiming for slightly lower demographics than global players. Their aim to convert mainstream TV audiences to OTT has already happened in China. Earlier, China was a purely AVoD market but today has hundreds of millions of SVoD subscribers.

Another key factor behind the success of local streamers is their relationship with telcos, ecommerce platforms, digital wallets, and other apps and tech partners, as credit card penetration is low and most consumers access online video via their phones.

However, while Southeast Asia’s local streamers are well positioned in terms of partners, business models, and local market knowledge, and are being innovative in their production strategies, the question that would not go away is how long can they withstand US competitors that are spending billions of dollars on content.

Competition between OTT players is happening across the globe. The availability of affordable, high-speed internet, and inexpensive mobile devices means there is a vast, untapped audience in India and Southeast Asia.

Excitingly, the OTT market remains fluid with much of it up for grabs. While Netflix is the dominant player in the US, it lost share to new entrants, and established players like Disney and Amazon Prime were usurped by newcomer HBO Max. In India, regional streamers are expected to steal market share from established global rivals, while in some parts of Southeast Asia, regional streamers are already way ahead of large US-based OTT providers.

 

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