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Rise of Video: Analyzing Consumer Spend on Netflix, Amazon Prime Video, Hotstar etc

Co-Founder & Head of Business, Transfin.
Aug 25, 2018 5:39 AM 5 min read
Editorial

As a wide-range of video platforms continue to proliferate the domestic market, the consumer appears to be fatigued and overwhelmed by the myriad of choices at disposal.

 

Time and Money are both finite resources and consequently building a bespoke content package appears to be the order of the day.

 

Over the last four weeks, as part of a series we called - Rise of Video, I touched on the Indian Video-On-Demand (VOD) landscape. Subsequently, I did a deep-dive into Netflix, Amazon Prime Video and Hotstar, albeit through an India-tinted lens. In that backdrop, I am now concluding this series by an attempt to tie these content platforms with the consumer’s wallet. It’s an exercise which is somewhat challenging driven largely by diverse range of individual content preferences but also a noisy pricing environment impacted by dynamic discounting, one-time offers and other ad-hoc factors.

 

As VOD platforms including but not limited to the aforementioned platforms, continue to proliferate the domestic marketplace, we find ourselves amidst a rapidly evolving environment. All VOD platforms appear to be competing for eyeballs with a common underlying objective – net subscriber progression (gross subscriber progression, less churn). In that context, we are already seeing a fairly crowded marketplace with multifarious content offerings (exclusives and non-exclusives) distributed across a range of platforms. Each platform presenting a compelling case of its own.

 

Consequently, the consumer appears to be fatigued and overwhelmed by the myriad of choices at disposal. While it is difficult to break down on what services and platforms appeal to who at an individual level of granularity, one thing is certain – services cannot be infinitely additive.

 

Said another way, time and money are both finite resources and there is a theoretical upper-limit on both those variables from the perspective of deployment towards video content consumption. In that context, one has to be selective and strategic on what services to choose to serve ones respective content needs. This presents the classic challenge of decision-making.

 Rise of Video: Analyzing consumer spend on Netflix, AmazonPrime Video, Hotstar etc 

Building the A-la-carte Content Package

 

Let’s take a back of the envelope crack at estimating one’s annual expense on video content. Admittedly, by no means is this an exhaustive exercise as it is an insurmountable endeavor to factor in every permutation and combination.

 

Direct-To-Home (DTH) Operators (such as Tata Sky , Airtel TV etc) appear to be a nice starting point – still the backbone of content viewing in many urban households and largely resistant to choppy internet connections. DTH operators typically deploy bundled pricing strategy. Consequently, depending on the choice of programming yearly bill can range from ~INR 2,000 for a basic package to ~INR 8,500 for the complete all HD offering (excluding one-time set top box costs) per screen. With meaningful regional channels and several channel packages with confusing nomenclatures (by design I would argue) in the offering, choices can vary substantially from subscriber to subscriber.

 

In contrast, Over-the-top (OTT) VOD platforms offer relatively fewer pricing tiers. Netflix prices range from INR 500 per month (for one screen in Standard definition) to INR 800 per month (for four screens and High Definition/Ultra High Definition) implying INR 6,000 – INR 9,600 on an annualized basis. Note that the actual content is same across those tiers. Hotstar, on the other hand, operating under a freemium model ranges from free (limited content) to annual prices of INR 299 (sports content) and INR 999 (all content included). Meanwhile, Amazon Prime Video with a single price tier of INR 999 per year offers all content available on the library and is bundled with benefits associated with their core e-commerce business. Throw in Colors-owned Voot (free), Balaji Telefilms-owned Alt Balaji. Google owned and ad-supported giant YouTube into the mix, among others, and the choices for content consumption ramp up fairly quickly.

 

In the table below, I have presented a laundry-list of selected video platforms with a corresponding expense estimate.

Rise of Video: Analyzing consumer spend on Netflix, AmazonPrime Video, Hotstar etc

In this exercise, I have included spends on wireline broadband and mobile data despite not really being pure content spends but somewhat prerequisites for OTT viewing. One might dedicate only a percentage of their mobile and broadband spend towards video content consumption, however for the sake of simplicity we have taken a binary approach of included it all or exclude it all. In that context, subscriptions to all the services (in addition to internet) can range from ~ INR 19,000 to INR 50,000 on a full year basis.

 

However, subscription to all aforementioned OTT platforms, might make the subscription to a DTH service somewhat redundant which should drop the spend by INR 2,400 to INR 8,500 on average. As alluded to earlier, there is an additionally layer of complexity with one-time promos and other B2B deals, wherein some premium internet packages include free subscription to a VOD platform for the first year. This aspect is ignored largely due to its non-recurring characteristic over the longer-term.

 

For example, Airtel broadband subscription includes first year of Amazon Prime membership free, which is not adjusted for in the above chart. It is clearly evident that the range in DTH pricing is significantly wider than OTT VOD services. This is fairly intuitive - for example Netflix has the same content across its pricing tiers - it’s the quality that varies from SD to HD (and also no of screens which is yet another unadjusted factor). Amazon has only one tier. This compares to DTH’s long list of packages at wide ranging price points.

 

Needless to say, this is just a back of the envelope exercise and one can see meaningful shifts depending on the exact combination of products/services especially on the Television side. YouTube is a free ad-supported platform, however we have included it since the role of YouTube content in eating up your overall content consumption time can be meaningful for some and also its increasingly ubiquitous nature.

 

Money is a finite resource which almost certainly will have an upper-limit. Similarly, time is a limited inventory and 24 hrs a day or 8,760 hours a year are hard ceilings, although actual content consumption time will probably be fraction of that anyway.

 

Happy viewing!

 

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